Own vs Investment !! Old VS New

[rajorich25]

Hi All,

Another Novice question for experts.
I started my analysis by filtering out areas where i would be looking for a property and I am pretty close to zero it out to three areas on the basis of
Property appreciation ,rental yield, safety around suburb etc.
Most of the properties are southern Australia side where I am seeing more opportunities and I am looking only in NSW .

Now I stuck on two questions -

In terms of avoiding GST I am thinking of living at the house for at least six months and then convert to investment property and put it on rent and shift to other area where I need to pay lower rental and also i can enjoy tax benefit.But I can't achieve the same if i buy property far away ,it that case I need to focus in nearby areas ...the question is -
1) in terms to avoid GST , do we need to live in the place for six months ( for ex) within first year itself or within 6 years of span , any year will work ..?


As per first home buyer's grant I could be eligible only if i buy new property and should be mine first property as well , here is the question -

2)I will get around 35K under first home buyer grant ,which is not sufficient to decide to buy new property instead of second hand property ..but what about the depreciation ?..i heard there would be lot of depreciation on new property as compare to old property..can anybody gives me a rough idea how much depreciation we can charge in first five years on new property VS new property and what make you decide to find a solution of this dilemma.

I know old property depreciation depends on when it was build ( year) but we rarely see any advertise how old building is while selling ..so how do you decide in such condition and do the filtering at first hand.

If some one is having tax calculation sheet for IP VS OWN and NEW vs old prperty ..it would be a great help.

Thanks in advance...

Regards,
Rajorich25

 

[Paul@PFI]

GST...You mean CGT (Capital Gains Tax) ?

 

[tobe]

tax calculation for new vs old is only part of the equation. capital gain potential, rental yield, repairs and maintenance along with some other factors are equally, if not more important.

Dont think new vs old, think best deal. A lot of the time new homes are sold by developers, and they rarely discount like couples divorcing, or kids liquidating their inheritance might. This might mean you can find a better deal, ie under market in hte 'old camp'. Alternatively you might find a distressed developer, or an OTP purchaser who cant complete and needs to offload under market.

Good luck.

 

[rajorich25]

HI Paul ,

you are right , it is capital gain tax.

Hi Tobe ,

You are absolutely correct , but i need to be aware about these info to be better prepare .
If i would be knowing answer of these question then i should be able to make informed decision which will result in good deal.

Thanks in advance guys and please guide with you valuable answer on those two questions.

 

[rajorich25]

Any help experts ....

Basically the answer I am seeking is around these two questions-

1)) in terms to avoid CGT , do we need to live in the place for six months ( for ex) within first year itself or within 6 years of span , any year will work ..?

2)I will get around 35K under first home buyer grant ,which is not sufficient to decide to buy new property instead of second hand property ..but what about the depreciation ?..i heard there would be lot of depreciation on new property as compare to old property..can anybody gives me a rough idea how much depreciation we can charge in first five years on new property VS new property and what make you decide to find a solution of this dilemma.

Regards,
Rajorich

 

[macca446]

Any help experts ....

Basically the answer I am seeking is around these two questions-

1)) in terms to avoid CGT , do we need to live in the place for six months ( for ex) within first year itself or within 6 years of span , any year will work ..?

2)I will get around 35K under first home buyer grant ,which is not sufficient to decide to buy new property instead of second hand property ..but what about the depreciation ?..i heard there would be lot of depreciation on new property as compare to old property..can anybody gives me a rough idea how much depreciation we can charge in first five years on new property VS new property and what make you decide to find a solution of this dilemma.

Regards,
Rajorich

Hi,
Firstly to receive home owners grant you need to live in property for at least 6 months,CGT has a 6 year rule.
As far as depreciation goes it depends on cost of the building where you get the most from but to give you an idea I completed a purchase last Sept property was built 1998 I have an average of 5k to 6k a year for next ten years,hopes this helps a bit.
Macca446

 

[rajorich25]

Hi,
Firstly to receive home owners grant you need to live in property for at least 6 months,CGT has a 6 year rule.
As far as depreciation goes it depends on cost of the building where you get the most from but to give you an idea I completed a purchase last Sept property was built 1998 I have an average of 5k to 6k a year for next ten years,hopes this helps a bit.
Macca446

Thanks Macca,

Firstly to receive home owners grant you need to live in property for at least 6 months,CGT has a 6 year rule.- you are correct - but is it needs to be in first year of pruchasing the property or it can be any year in 6 years span.


As far as depreciation goes it depends on cost of the building where you get the most from but to give you an idea I completed a purchase last Sept property was built 1998 I have an average of 5k to 6k a year for next ten years,hopes this helps a bit.-- thanks again , but what would be the case of newly build property, what is the depreciation of a new property ( vaguly) ?

 

[rajorich25]

Any expert help please ....:-(

 

[alexlee]

Here's something to think about:

CGT exempt or not should never be a consideration when buying property. You can only have on PPOR at a time, but you can have unlimited IPs. In the long run, if you manage to build a large portfolio of investments, whether you get a couple of years CGT exempt on one property doesn't matter. CGT exemption on your long term PPOR is nice, but you would buy it even if it wasn't CGT exempt.

Depreciation, generally, shouldn't be a concern either. Usually, it's the growth that makes the investment worthwhile. Depreciation is a nice extra.

The more important things are what name to own in, and whether you have the right loan (with the 'right' bank in terms of future serviceability, and whether it has the appropriate features such as offset).

 

[GaryT]

To ensure maximum CGT exemption you need to move in to the property as soon as it is purchased or ready for occupation. If it is a new build you need to live in the property for at least 3 months. If not new then there is no minimum time but as you need to establish actually residency, it would be difficult to do so if you were there only a very short term.

As you are limited by the first home owners scheme anyway (i.e. generally 6 months in the first year) then this should be fine.

Once you have satisfied this requirement and subsequently move out, you can choose to declare this property as your main residence for CGT purposes for up to 6 years if it earns income. If you acquire another PPOR then you have to choose which one will be CGT free i.e. you can only have one PPOR at a time for CGT purposes.