Reply: 1.1.1.1.1.1
From: Terry Avery
I thought I would just expand a bit on what I said before about not chasing tax deductions for the sake of lowering the tax bill.
Two IPs owned by higher earner.
Loans of $306K at 6% interest = $18,360 interest p.a.
Tax refund at 47% rate = $8,629
Transfer to lower income earner
Loans of $360K at 6% interest = $18,360 interest p.a.
Tax refund at 30% = $5,508
So you have lost $3,121 in tax refund
Stamp duty on two properties worth $220K in VIC might be around $15,000 each
Say conveyancing, loan fees, title office fees costs another $2,000
So you have spent $34,000 and decreased your tax refund in order to avoid paying tax on the profit.
Say your profit on the rent is $5,000 a year then you would pay tax of $2,350 leaving $2,650 for you.
I hope you can see what I am getting at. The great Australian preoccupation of avoiding paying tax is costing some people dearly.
What you need to do is crunch the numbers. What is your current financial position? Lay it out clearly. What would be your financial position if you followed your broker's advice? What are the costs involved? If you are ahead financially how long will it take to recover the costs of the transfer?
Have fun
Terry