Correct financial structure

[rajorich25]

Hello All,

I have been reading posts on this forum and realized most of the people fell stuck after buying first two property as they are unable to produce cash flow to be able to qualify for this IP loan or refinance and ended up waiting their property to have equity developed in it .

I am just starting and below is my situation

Me and my wife jointly earns around 180K per year , pays around 30 K in tax..have around 15K in Super and 80K in cash

Scenario 1-

Buy new property by dec 2014 ( around 600K worth) taking 80 % loan , below are the calculation
Tax delectable -

Interest paid per annum- 26000 ,depreciation -10000
, other expenses(one time off) -5000
total tax delectable -40000
total tax applicable -36K ,
fist home buyers grant -36K

after two years i should be able to re-finance my property and add up some extra money to buy another property , this time neutrally geared ..

do you think above mentioned structure is correct ? any better suggestion which could by helpful in long term..

I hear people say total buy property by keeping tax benefit in mind ..but a money saved is money earned..correct me if any of my calculations or assumptions/understanding are wrong ..

+++++++++++++++++++++++++++++
second scenario-

as i don't have anything to show as tax deductables for this year , should i put 25K (each ) ,total 50K in SMSF and then buy property through SMSF
i should borrow rest of the money for down payment and then buy new property through SMSF, in this way i will be reducing tax liability for this year as well which is 36K in total...


Kindly advice...

Regards,
Rajorich25

 

[alexlee]

On that sort of income, it shouldn't be hard for you to just save for deposits. You savings and super seem very low. Unless you're young and/or got to this income level recently. How much are you saving at the moment?

Those tax figures look low. 30k tax on 180k combined income? Also, if you take the grant, you can't deduct anything during the period you live in the property.

Super is a different kettle of fish. You sure you want to lock money away until your 60s?

You seem to be focusing solely on tax.

 

[alexlee]

Also, learn the termimology and the rules. It's tax deductible, noy delectible, and it always worries me when people mention the tax deductible amount and the amount of tax they pay in the same sentence.

A deduction of $10 and tax payable of $10 do NOT offset each other.

 

[Terry_w]

do you think above mentioned structure is correct ? any better suggestion which could by helpful in long term..

You haven't mentioned a thing about structure - just a list of expenses.

What is the first home grant of $36k you mention?
If you qualify for a grant it may be that you will need to live in the property to get this??

Whether the expenses listed are deductible will depend on how it is all set up.

 

[Paul@PFI]

Your understanding of super isnt anywhere near where it should be to contemplate such a decision.

Not all taxpayers can make deductible contributions to super of $25K.
The superfund would have a trivial amount to invest ($65K). As a joint owner it might own 10% but then the property cant be used as loan security !! and the fund can never acquire any more of the property.

You didnt mention your age. Super remains preserved until you reach preservation age - Maybe 60. If your proposal it to grow long term retirement wealth that's fine but if you propose to use any of it bear that issue in mind.

Personal advice concerning you tax position, incomes, borrowing capacity and investment objectives would be your first step. The start of a plan.

 

[rajorich25]

Thank you guys for your precious response-

@Alexlee
"Also, learn the termimology and the rules. It's tax deductible, noy delectible, and it always worries me when people mention the tax deductible amount and the amount of tax they pay in the same sentence.

A deduction of $10 and tax payable of $10 do NOT offset each other."

Sorry for spelling mistake, i meant tax deductible only , it was my browser grammar auto correction which was playing off , I switched it off now..

also "A deduction of $10 and tax payable of $10 do NOT offset each other."
you are correct , i was doing exactly the same..do you recon any spreadsheet or any on-line tool where i can foresee the results after deductions before making any decision ,i understood you point now thanks ...I will try and see if i can find out anything online..

My saving and super are very low as I have recently migrated to Australia and wife started job only three months back..I am saving around 7K per month at the moment.


@Terry

as FHOG (in nsw) ,If a first home buyer purchases a new property worth $550,000, they are entitled to receive $35,240 from the combined new home owner grant and stamp duty concession. thats'what my understadning is
..is it incorrect ? i would be paying pro rate basis stamp duty(on difference) for a property above 550K

Yes i have counted first six months to live in a property and then make it IP.
Thats'why i have counted tax deduction from start of next financial year (2015) assuming i am buying property by dec 2014

Structure ? -there only i am seeking advice if i is it better it buy as individual or through trust etc from a long term perspective ?..what all options i have to choose and what are their advantages..?


@paul- you are correct and thanks ..SMSF is not for me at the moment...I was weighing all the options and SMSF was one of them ....


Regards,
Rajorich

 

[Terry_w]

@Terry

as FHOG (in nsw) ,If a first home buyer purchases a new property worth $550,000, they are entitled to receive $35,240 from the combined new home owner grant and stamp duty concession. thats'what my understadning is
..is it incorrect ? i would be paying pro rate basis stamp duty(on difference) for a property above 550K

Yes i have counted first six months to live in a property and then make it IP.
Thats'why i have counted tax deduction from start of next financial year (2015) assuming i am buying property by dec 2014

Structure ? -there only i am seeking advice if i is it better it buy as individual or through trust etc from a long term perspective ?..what all options i have to choose and what are their advantages..?

I don't know if that is correct or not. I haven't dealt with a first home owner in years.

Structure doesn't necessarily mean a trust - how will you structure things in individual names:
Sole - you
- spouse
joint
- TIC.
- equal shares
- unequal shares
-JT

Deposit
- who contributes and how

etc

 

[The Y-man]

Those tax figures look low. 30k tax on 180k combined income?

This definitely doesn't look normal.....

The Y-man

 

[Terry_w]

Tax on $90k would be approx $22,597 so it doesn't really look right.

 

[D.T.]

This definitely doesn't look normal.....

The Y-man

Maybe 30k was just his own, ie just a matter of wording. If so then he'd earn 110k and his wife the balance.