Dan C
OK I will (also) try again
Ignore my income, the figures are as below (no depreciation)
rental income 22000 - cash received
costs (strata etc) 2000 - cash paid out
income 20,000 - net cash received
interest cost 30,000 - cash paid to the bank
loss from property $10,000 - net cash paid to be paid to the bank
tax loss claimed in my tax return - since i am in 41.5% bracket
I get a refund of $4,150 from the Government - cash received
net cash to be paid to the bank $5,850
Now i have to pay this cash to the bank. Right?
This cash has to come from somewhere
I am a employee - i work and then i get paid
Remember I need $5,850 CASH to pay to the bank - my annual salary is $120,000 or $10,000 a month.
My boss pays me $5850 CASH every month after deducting tax of $4,150 (for this example - let us not worry about withholding tax is correct or not)
I use one month salary to pay the $5,850 CASH to the bank as bank interest.
my one monthly salary is $10,000 = all of it is gone to own this investment property. It costs me $10,000 of my income to own this property
Am I right? There is no double counting of cash.
If i could salary sacrifice in super - this $10,000 of my one month salary - i would have more money in my super and somehow If could pay no tax on contribution - i could be better off - with Super Gearing - this is possible.
Those who have commented earlier - please find a mistake in the above.
I am not here to prove any one wrong - but maybe my method may be different - I do not blame those who have got it wrong - the problem is that the topic has been taught incorrectly by those who benefit - property developers and promoters
BV - the point is that Negative Gearing must now be replaced with Super Gearing = but we do not understand Negative Gearing correctly - they still think that owning the property will cost only $5,850 and not $10,000 of their income. I feel this has to be corrected, only then we will look at Super Gearing seriously. There will be some, who will still think that i am wrong - but if i have even put an iota of doubt in their minds - my job is done.
The tax man still gets their fair share - if they did not - NG would have been abolished a long time back. Do not forget the ATO is your partner in your property investment - they will get a cut when you sell the property in the form of CGT - but will not share if you lose - Capital loss is only carried forward and does not reduce income. And every year, when you pay to the bank - it is profit for the bank - and the ATO collects tax on that profit - they have no interest in removing NG.
If property is purchased in a SMSF - it is possible to reduce your CGT to Zero ie when you sell the property in pension phase.... every day ... more and more super fund members and property investors are finding out this fact and about 2000 / 3000 SMSF are being set up every month...
Hooray ... no offense taken .... I am used to this....
Manoj Abichandani
SMSF Specialist Advisor
SMSF Specialist Auditor
Tax Agent, FTIA, PNA, REA
OK I will (also) try again
Ignore my income, the figures are as below (no depreciation)
rental income 22000 - cash received
costs (strata etc) 2000 - cash paid out
income 20,000 - net cash received
interest cost 30,000 - cash paid to the bank
loss from property $10,000 - net cash paid to be paid to the bank
tax loss claimed in my tax return - since i am in 41.5% bracket
I get a refund of $4,150 from the Government - cash received
net cash to be paid to the bank $5,850
Now i have to pay this cash to the bank. Right?
This cash has to come from somewhere
I am a employee - i work and then i get paid
Remember I need $5,850 CASH to pay to the bank - my annual salary is $120,000 or $10,000 a month.
My boss pays me $5850 CASH every month after deducting tax of $4,150 (for this example - let us not worry about withholding tax is correct or not)
I use one month salary to pay the $5,850 CASH to the bank as bank interest.
my one monthly salary is $10,000 = all of it is gone to own this investment property. It costs me $10,000 of my income to own this property
Am I right? There is no double counting of cash.
If i could salary sacrifice in super - this $10,000 of my one month salary - i would have more money in my super and somehow If could pay no tax on contribution - i could be better off - with Super Gearing - this is possible.
Those who have commented earlier - please find a mistake in the above.
I am not here to prove any one wrong - but maybe my method may be different - I do not blame those who have got it wrong - the problem is that the topic has been taught incorrectly by those who benefit - property developers and promoters
BV - the point is that Negative Gearing must now be replaced with Super Gearing = but we do not understand Negative Gearing correctly - they still think that owning the property will cost only $5,850 and not $10,000 of their income. I feel this has to be corrected, only then we will look at Super Gearing seriously. There will be some, who will still think that i am wrong - but if i have even put an iota of doubt in their minds - my job is done.
The tax man still gets their fair share - if they did not - NG would have been abolished a long time back. Do not forget the ATO is your partner in your property investment - they will get a cut when you sell the property in the form of CGT - but will not share if you lose - Capital loss is only carried forward and does not reduce income. And every year, when you pay to the bank - it is profit for the bank - and the ATO collects tax on that profit - they have no interest in removing NG.
If property is purchased in a SMSF - it is possible to reduce your CGT to Zero ie when you sell the property in pension phase.... every day ... more and more super fund members and property investors are finding out this fact and about 2000 / 3000 SMSF are being set up every month...
Hooray ... no offense taken .... I am used to this....
Manoj Abichandani
SMSF Specialist Advisor
SMSF Specialist Auditor
Tax Agent, FTIA, PNA, REA