Simple and Sustainable Forums: Sean - Viewing Profile - Simple and Sustainable Forums

Dose, on 03 April 2012 - 11:21 AM, said:

darcy's stated ambition on his webpage at one time was to do medicine. not sure if any school in the country would take him now.

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that says it all -- truth in naming at last!

minimumtrade, on 19 March 2012 - 12:13 PM, said:

how did you get the vanity plates from my matching Ferraris, have you been staking out my Point Piper residence?

zaph, on 19 March 2012 - 08:31 AM, said:

oops, you're right -- she gets to keep all her $30K gain against her $500K loss -- assuming she sells the place for that much in the end. Otherwise it might be possible to have bought it into a company, and the expenses could be written off in tax against earnings. But I think the ATO frowns on buying a place into your company and then renting it from yourself for tax deductions, I've seen a ruling where this is seen as a 'scheme' under Part IV of the Tax Act and prosecutions ensue with penalties etc etc -- once this idea came to be mass-marketed by 'wealth seminar gurus' to relatively ordinary folks the ATO started cracking down on it in particular. Not sure what creative tax advisers for the mega-rich have come up with most recently however. She may be able to count it as some sort of 'entertainment expense' given her job and offset it against her professional earnings, but the ATO simply says you have to live somewhere, you cannot 'rent' your place from your own company and then claim deductions for any losses. Regardless of the tax breaks, though, a loss is a loss -- it's only mitigated by the tax break -- admittedly it could be of the order of a 50% deduction for high earners -- but I'm just guessing at her creative tax accountancy...

hmm, there's no net profit at all, only a loss. There might be a capital gain over the buying price, but she would have to pay tax on that as well as taking the loss on all the expenses of buying and selling:

- stamp duty -- about $100K at a guess
- conveyancing solicitor, mortgage duty, etc -- $2-5K?
- selling agent's fee -- maybe 1% for a premium property -- $23K -- could be higher up to say $35K
- property sale advertising costs -- maybe $20K
- value of money loss due to inflation -- about 9% over 3 years -- a wacking $207,000 -- although the 50% CGT concession at least more than allows for inflation when being taxed on property transfers in the short term
- interest paid on any leverage she may had on the property -- let's say just a $1M loan cos she had the rest in cash from walking about -- $210,000 over 3 years
- maintenance on the pool, body corporate expenses, council rates, etc -- $20K?

That's a potential loss of $595K for owning for 3 years, assuming she gets her $2.3M back sometime soon.

Even if she paid cash for the place, expenses would have still been about $385K.

If she's lucky now, she will make $30K on the last sale price, on which she would have to pay around 25% tax, thus reducing the cap gain to $22,500. Offset against her expenses, 3 years of ownership would have cost her anywhere from $360K – $565K net, none of which is redeemable via tax as an owner-occupier. (Marked in red as a loss!)


Funny how that esteemed business journal the 'Property Observer' fails to mention any of those expenses in the article. I suppose they are only observing.