Negatived geared property – calculate ’out of pocket’ expenses after tax

J

johk

Hi,

I am trying to get my head around how calculate my income if we have a negative geared property. Any comments on the workflow below is much appreciated.

When I calculated the income tax I used the calculator on this site http://www.paycalculator.com.au/

Total loan amount including stamp duty, fees etc: 420’
Assumed Interest rate: 6.8%
Rent: 410 pw
Income: 100000

Expenses:
Interest: 28560
Body corporate: 1800 per year
Rates including sewer and water: 2152
Property management (8%): 1710
Repairs: 1000
Landlord insurance: 350
TOTAL: 33572

Income:
Rent 410*52 = 21320

Cash shortfall: 14252
Depreciation 8000
TOTAL: 22252

New taxable income 100000-22252 = 77748 => Tax on 77748 => 14970

New income after tax: 100’ – 14970 – 14252 = 70778


Thanks,

johk
 
Last edited:
I'm not an accountant but here is my take on this.

Your income tax without the IP = Tax on 100K = $24950 (according to your site)
Net income without IP = $73300 (according to your site)

So out of pocket = 73300 - 70778 = $2522
 
What you need to do is to work out the tax savings by old tax minus new tax payable.

Then deduct add this to the income from the property (which would be negative if a loss).
 
Hi,

Thanks for your responses and thoughts. I think I have got my head around how to calculate the depreciation for the property.

How does this work in ‘real’ life though? Are my assumptions below OK?
I will lodge a Tax variation form with ATO and they will get back to me with a form verifying my new tax. I hand my employer the form received from ATO and he will adjust the amount of tax I pay.
If I for example take a sub-loan (Loan 1) from our PPOR to cover 20% deposit for the IP, fees etc. We then take out a loan (Loan 2) for the rest of the 80% of the IP with say a different lender.
The rent we get from the IP will be paid into Loan 2 but as the repayments for loan 2 is greater than the rental income we have transfer money monthly into Loan 2 to make up the shortfall.

Thanks,
Johk
 
Thanks for the heads up – I didn’t know there were a penelty.
For the property we have been looking at I actually have the current owners depreciation schedule and when I a check on our numbers I didn’t use the full depreciation – call it being over cautions’.

johk
 
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