Join our investing community

Advice - Investment Strategy

Discussion in 'Investing Strategies' started by MasterCheif, 25th May, 2008.

  1. MasterCheif

    MasterCheif Active Member

    Joined:
    22nd Sep, 2007
    Posts:
    43
    Location:
    Melbourne
    Hi All,

    It has been a while since I have posted - so thought i would give an update as to what i am currently doing and obtain your thoughts.

    - Currently 22 years old
    - Earn around 70k pa in IT
    - Recently bought a house 316k (3 Bedroom House - Berwick Melbourne)
    - Current Mortgage 248k
    - Current Rent 300pw
    - 4k Macquarie Small Companies Growth Trust (100 additional per month)
    - 100 STW shares
    - Still live at home

    I will need to move into this house soon so that i can use the FHBG, i plan to do this by the end of the year - stay there for 6 months and then move back into the parents place to continue saving and paying off as much as I can.

    I currently have a P&I loan with ING and am trying to put as much money into this as i can to try and build some equity and then hopefully use this to buy a PPOR in a few years time. I also hope to continue buying STW and buy some SLF over the next few months (hopefully ending up with 10k of each by the end of the year..)..

    What can i deduct from the house? as i purchased it with FHBG can i not deduct any interest until after I move out and its an official IP. Or as its currently rented now am i able to deduct the interest/other bills until i move in?...

    Hope I have made some sense - and would appreciate any comments..

    Cheers.
     
  2. MasterCheif

    MasterCheif Active Member

    Joined:
    22nd Sep, 2007
    Posts:
    43
    Location:
    Melbourne
    Also - as the rent is likely to push me over the 75k per annum is there any advice on how I can claim maximum tax? Or any other strategies to reduce my taxable income below 75k?

    Cheers.
     
  3. MasterCheif

    MasterCheif Active Member

    Joined:
    22nd Sep, 2007
    Posts:
    43
    Location:
    Melbourne
    bump
    ...................
     
  4. jrc77

    jrc77 Well-Known Member

    Joined:
    26th May, 2008
    Posts:
    147
    Investment

    As a newbie here myself I would take everything I saw with a grain of salt .... (which is the closest I will get to a disclaimer).

    However, I suggest that you have a read around the forums looking for topics to do with offset accounts and tax deductability. The approach you want to take (build up equity in your IP which you then redraw to buy a PPOR) will leave you with non deductable debt (as the redraw is to buy the the PPOR, not an investment). If you had an offset account, then you could put extra repayments into that and later take it out to purchase your PPOR - leaving the original loan as tax deductable (as it is on your IP).

    Not sure that ING offer an offset account though ...

    Wish I new about the tax advantages of offset accounts before I bought my home :)

    JR
     
  5. Billv

    Billv Getting there

    Joined:
    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW
    MasterCheif

    You cannot claim anything while it is your PPOR.
    However, if it's rented when you buy it IMO you can claim all interest, expenses and depreciate it as normal.
    This situation is not uncommon.
    Many people buy properties and they have to wait for the tenants to move out.
    Check with your accountant.
    I believe you have up to 12 months to move in but you do have to move in to be entitled to the FHOG.

    Cheers
     
    Last edited by a moderator: 27th May, 2008
  6. MasterCheif

    MasterCheif Active Member

    Joined:
    22nd Sep, 2007
    Posts:
    43
    Location:
    Melbourne
    Yep so i purchased in March 2008 and wont be moving in until December 2008. It will be rented out this entire time, so therefore come tax time all the costs involved with buying the property should be deductable?

    It is very annoying that ING dont have offset accounts - surely they have to introduce them soon to be competive? I might not redraw the account and might just save for a deposit the old fashioned way, that way once i move out of this house the interest will be deductable?

    Appreciate your comments on this.
     
  7. Billv

    Billv Getting there

    Joined:
    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW
    Some are deductible, some are depreciable
    Your accountant should know how to deal with each expense.
    Cheers
     
  8. Simon Hampel

    Simon Hampel Co-founder Staff Member

    Joined:
    9th Jun, 2005
    Posts:
    4,623
    Location:
    Sydney, Australia
    Most costs involved with actually buying the property ("purchase costs") aren't deductible anyway - they are added to the cost base for capital gains calculations so you get a benefit when you sell. This includes any initial repairs and other work you did to make it rentable.

    Some finance costs should be depreciable over a period of time (5 years I think) - but check with your accountant about that - since some of these costs may be considered "purchase costs" (and hence added to the cost base).

    For anything else (including depreciable items), you will need to apportion the amount claimed for the percentage of the year that it was an IP - so if it was available for rent for 10 month of the year, you would claim 10/12ths of the rent (to be more precise - you could calculate it based on the number of days - something like 310/365).