BV / Alex
My brother had 14 IP's - i sat down with him and did sums for each of his 14 properties - the loss (grossed up) he makes each year and the tax he will pay on sale - CGT and after working out the stamp duty and the agents commission on sale. The profit and loss of all the transactions showed that he was making no money - Now, I request you to do the same for all your properties and assume you will sell all of them today. Please do this exercise to see the "real benefit" of owning them, also do not forget the every year loss you are making "in hope" they will go up further - that hope is nothing more "but inflation" - the cost of laying one brick tomorrow!
What i am trying to say - owning a property outside of super is not a tax effective environment - as far as accessing super is concerned before the preservation age of 60 (65 is current Govt pension payment age) - that is possible if you are before you are retired and not working - so those who think you can not get your money out of super before you are 60 - please see your SMSF Specialist Adviser....
So the difference of owning the property inside of super is that "simply pay less tax on income and no tax on sale"
There is this huge "lack of knowledge" on super which needs to be filled - please do not ring your local accountant - you need a SMSF Specialist - you can visit www.spaa.asn.au and find one close to you.
Please do not turn around and say that you will never sell - i have this story about a Greek investor - who is 65 years old and owns 7 properties, all paid up - all purchased after CGT legislation for $200K - all the properties are worth about $700K today - good buys - but the problem is - they are in his and his wife's name - they generate $150K between them - since the properties are old - there is no Depreciation left to claim - Their taxable income is $75K each - which means that they will pay tax till they die. Further, it is too expensive to sell as the CGT will kill the fun - the option is to keep them till they die - after that if the kids will sell them - they will pay CGT - you cannot run away from paying CGT - which is basically tax on inflation based growth.
They have an option of buying another 5 and gear up at the age 65 - but they will end up with less cash - yes they will save tax - but when you have 7 properties at age 65 you do not want the hassle of another 5! - come' on the whole idea was to have fun - when they retired - so that they could enjoy the cash flow...
I do not know how old you are - but one day you will be 65 with 7 paid up properties with heaps growth (due to inflation) - Have you planned for that day?
The other option is to sell all the current properties today and buy a few in super
rent is tax free once you move to pension phase
no CG tax on growth
As far as needing cash is concerned for some sudden need - come' on that is a myth - when have you (or you know anyone) has ever required $100K in a hurry ! probably never! and if you - own a grand home with heaps of equity - refinance your own and you can access the $100K with a phone call....
If you live in a house worth $800K and own two IP of $500K each - you are better off as far as growth and tax is concerned with one PPR instead of three properties = the sums do not stack up - i would rather live in a $1.8M house - please do the sums with looking at NG / Growth / CGT aspect etc - do a spreadsheet - you might just get very surprised with the end result.... - it is all because of CGT - that is the most hated tax.
My brother had 14 IP's - i sat down with him and did sums for each of his 14 properties - the loss (grossed up) he makes each year and the tax he will pay on sale - CGT and after working out the stamp duty and the agents commission on sale. The profit and loss of all the transactions showed that he was making no money - Now, I request you to do the same for all your properties and assume you will sell all of them today. Please do this exercise to see the "real benefit" of owning them, also do not forget the every year loss you are making "in hope" they will go up further - that hope is nothing more "but inflation" - the cost of laying one brick tomorrow!
What i am trying to say - owning a property outside of super is not a tax effective environment - as far as accessing super is concerned before the preservation age of 60 (65 is current Govt pension payment age) - that is possible if you are before you are retired and not working - so those who think you can not get your money out of super before you are 60 - please see your SMSF Specialist Adviser....
So the difference of owning the property inside of super is that "simply pay less tax on income and no tax on sale"
There is this huge "lack of knowledge" on super which needs to be filled - please do not ring your local accountant - you need a SMSF Specialist - you can visit www.spaa.asn.au and find one close to you.
Please do not turn around and say that you will never sell - i have this story about a Greek investor - who is 65 years old and owns 7 properties, all paid up - all purchased after CGT legislation for $200K - all the properties are worth about $700K today - good buys - but the problem is - they are in his and his wife's name - they generate $150K between them - since the properties are old - there is no Depreciation left to claim - Their taxable income is $75K each - which means that they will pay tax till they die. Further, it is too expensive to sell as the CGT will kill the fun - the option is to keep them till they die - after that if the kids will sell them - they will pay CGT - you cannot run away from paying CGT - which is basically tax on inflation based growth.
They have an option of buying another 5 and gear up at the age 65 - but they will end up with less cash - yes they will save tax - but when you have 7 properties at age 65 you do not want the hassle of another 5! - come' on the whole idea was to have fun - when they retired - so that they could enjoy the cash flow...
I do not know how old you are - but one day you will be 65 with 7 paid up properties with heaps growth (due to inflation) - Have you planned for that day?
The other option is to sell all the current properties today and buy a few in super
rent is tax free once you move to pension phase
no CG tax on growth
As far as needing cash is concerned for some sudden need - come' on that is a myth - when have you (or you know anyone) has ever required $100K in a hurry ! probably never! and if you - own a grand home with heaps of equity - refinance your own and you can access the $100K with a phone call....
If you live in a house worth $800K and own two IP of $500K each - you are better off as far as growth and tax is concerned with one PPR instead of three properties = the sums do not stack up - i would rather live in a $1.8M house - please do the sums with looking at NG / Growth / CGT aspect etc - do a spreadsheet - you might just get very surprised with the end result.... - it is all because of CGT - that is the most hated tax.
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