Australia version of the USA 1031 Exchange

[Dominik]

Is there an Australia version of the USA 1031 Exchange.

The way it works, lets say you have a $100,000 propertry you buy and sell it 3 years later for $300,000. You have $200,000 that is subject to capital gains. In the USA you can use special companies that put that $200,000 into a 1031 exchange and you then pull the money out and use it to buy another property and you are exempt from paying capital gains... Untill you cash out or you can just keep using the 1031 to buy bigger and bigger property...

Is there an Australian equivilant of like foreclosures is it something that Australia doesn't have access to?

Thanks

 

[alexlee]

No, there is no equivalent. If you sell, you trigger a CGT event and have to pay CGT.

The closest thing would be to refinance (no CGT event), get some equity out and buy another property. CGT-free 'trading up' doesn't exist in Oz.
Alex

 

[The Y-man]

There is an extremely generous 100% discount on CGT if the property is your PPOR.

For investment properties, while you do get hit with CGT, your expenses related to the property (should they exceed rental income) are deductable expenses against your earned ("employment") and other income (so called "negative gearing" which as I understand is only available in Australia, NZ and Ireland).

Cheers,

The Y-man

 

[Kristine..]

Hi Dominik

It's fun reading www.creonline.com, isn't it!

Except that they do things quite differently in the US of A, and we have some unique investment tax situations here, and I would suggest that ours are very effective.

For starters, in Australia the Family Home is tax excempt.

You buy and own and sell without it being of any interest whatsoever to the Tax Office. So what many Australian families do is become serial Family Home owners, trading up through the life of the family and eventually scaling down, the idea being that the $1,000,000 Family Home yields tax free capital and you then go and buy a $250,000 unit to live in and live off the remaining $750,000. Well, that's the theory.

Investing in real estate also has some great tax incentives, primarily that of combining all income and offsetting that against all expense incured in the earning of that income, and then paying tax on the net income for the year.

When (if) you sell an investment property, if you time it right, your tax will again be negligible. So if you buy a property when you are twenty, and keep it until you retire and sell at some later date, you will only pay tax on half of the net capital gain calculated in the year of the sale. Easy.

Anyway, our tax rates are very reasonable, so don't let the idea of 'paying tax' blind you to what is really happening - you are building your wealth with every investment, and anyway, why sell? Buying and selling costs money, often far in excess of any tax payable, so focus on the primary goal rather than on the incidentals.

Good luck

Kristine

 

[geoffw]

Dominik

As was suggested in another thread- it's time to read some Australian books.

Many of the ideas suggested in books (or whatever medium) in other countries do not apply here.

 

[The Y-man]

Dominik

As was suggested in another thread- it's time to read some Australian books.

Many of the ideas suggested in books (or whatever medium) in other countries do not apply here.

...but don't despair! There are many ideas for here, that don't apply anywhere else


Cheers,

The Y-man

 

[Dominik]

Thanks for the info everyone. Interesting stuff, Geoff I know it time to start reading Australian stuff but that was just 1 last question I wanted an answer to see if there was a oz equivilant as I never saw anything anywhere.

The PPOR one a is interesting also, will work in your favour. I plan to get a appartment for as cheap as I can using the stratergies I learn with investing buy the end of the year. Being 20 and paying for a PPOR is much better than renting in my opinion if you can do it. Other people my age will not get a home for a long time.

Kristine are you psychic? I got alot of info from that site. Doesn't look like there is anyone outside watching me...

Thanks again ppl... Time to hit the "Aussie" books...