DOES CURRENT HOUSE VALUE AFFECT YOUR DEPRECIATION RESULTS?
by William Callaghan
Today a good client of mine posed a question to me.
And it’s a good one:
Revi said “Does the recent increase in value of my investment property affect the tax depreciation at all?”
The short answer is no.
That being said:
Tax Depreciation is based on the construction costs and if you do some work on your property right now – with prices through the roof – you’ll be able to claim more deductions than if you’d done the exact same work 24-months ago.
Right now renovation works have pretty much doubled in cost since 2019.
-a stick of timber framing has gone from $2.20 per length to $5.50… sometimes even over $6
(the 2019 bushfires hold most of the blame for that).
But every trade is affected. Even circuit breakers for electrical work are hard to get.
-an insider at Energex said they’ve just about exhausted all stockpiles of silicone chip components.
(fingers crossed there’s not major blackouts soon).
Critical infrastructure gets priority on these supplies when they do land on the docks, so tradies are finding it very difficult to get materials for their clients.
Supply and demand imbalance means the consumer pays.
But that’s the only way your depreciation report can be affected by current market conditions.
If you spend more on materials and labour you can claim a bigger deduction
But…
When the market’s up and you sell your property you may be up for more CGT.
My job as your QS is to help minimise that tax payable through a CGT Property market valuation report.
-but it’s not for everyone.
If your Investment property has always been a rental (i.e. you’ve never lived in it or aren’t moving into it yourself) then you won’t need a CGT valuation report. You’d be wasting your money.
Otherwise, I’m here to help.
I’m working on a new page on the website all about CGT market valuations. When ready, you’ll find it here https://wrcqs.com.au/other-qs-services/
William Callaghan
A BUILDER TO AVOID LIKE THE PLAGUE
by William Callaghan
I get to see a lot of builders in action.
Some are good. Some are not. And some are awful.
I know of one builder – right now – I’d like you to avoid.
He’s worked in 2 States under 2 different names and screwed over many customers with shoddy work. Or simply not even completing the build and ‘disappearing’.
Now he’s here in SEQ and operating under yet another name.
>>>No doubt to take full advantage of the bedlam that is the construction industry right now.
I won’t name him here for legal reasons – but if you’re about to build, shoot me an email with the guy’s name and I’ll reply with a “it’s not him, or, keep looking for a builder” if you like.
And if you are building, your bank may want you to get Progress Payment reports done at certain stages of the build -before they take the money from your new loan and give it to the builder.
This isn’t a new expense banks force us all through – but it is a lot more common now than 6 or 7 years ago.
It’s all about covering their hide should a builder go broke.
I actually do these reports for all the big banks and a few small ones.
Suncorp, Westpac, NAB, CBA, Bank of Melbourne, Bendigo, BoQ… even private lenders.
So if your bank says you need one, feel free to ask if I can do them. It’s your choice.
You can read more here https://wrcqs.com.au/other-qs-services/progress-payment-reporting/
It’s a page that’s a work in progress – but I’m getting there.
If you’re not building atm bask in that stress free lifestyle.
William Callaghan
WHEN IS THE BEST [AND WORST] TIME TO SPEND $10,000 ON YOUR INVESTMENT PROPERTY
by William Callaghan
Came a question from a good client:
“…I’ve just purchased another rental property and it needs about $10k of work. When’s best to do it for maximum tax benefits?”
My answer:
It does depend somewhat on what needs doing as there’s 4 categories the workss could fall into
If it’s all capital improvements like:
Paint, kitchen, bathroom, decking, fencing and so on – then you’re best doing it asap.
Why?
The answer is two-fold
1. You may get more rent straight away with some nice improvements like that
2. Whether you do those capital improvements straight away or in 12-months time, you can only claim them at 2.5% p.a. So you may as well start now
But…
If your $10k of works is for items like a bit of guttering, some patch up work, new locks, tapware, plumbing repairs and the like…
You’re best off waiting about 5-months to spend the money.
Why?:
That way you can claim it all at 100% write-off (repairs and maintenance items).
But…
If you did that exact same work within just a few months of purchase, the ATO says you probably can’t claim it as R & M at 100% write-off.
Their reasoning is – if you had to replace it so soon, it had no value in the first place and is therefore Capital Works not Repairs and maintenance.
Category 3:
If your $10k is for an oven, carpet, hot water system and so on, then you may as well spend the money when most convenient.
Here’s why:
Any brand new ‘plant and equipment’ over $1,000 in cost (fully installed) is claimed at the relevant % per year.
Example: Carpet 25% per year. Oven and Hot-water system 16.66% per year.
-So just spend the money on those items when you can afford it.
But Items less than $300 are claimable at 100% write-off… jsut like repairs and maintenance items.
For example: New smoke detector: $300 claimable at 100% write-off
New Ceiling Fan: $300 Claimable at 100% write-off
New Ceiling fan (different to the 1st one): $300 claimable at 100% write-off
The WORST time to spend $10k on your investment property:
If you have a Principal Place of Residence and you convert it to a rental, then there is one time yuo really don’t want to spend money on it.
Here it is:
Don’t spend any money on your PPoR until the very last moment.
-or better yet, the day after you move out and into your new home
Here’s why:
If you spend money on ‘Plant & equipment’ while you still live there (even if only for a few months) the ATO deems that as ‘used’ and therefore you can’t claim any deductions for them.
‘Them’ being:
Carpet – Lights – Appliances – fans – Air Con – Hot Water and so on
But… spend the exact same money, on the exact same items, immediately before tenants move in and you can claim everything as a tax deduction.
Capital Works Items:
Not such a drama here. Capital works are always claimable. Old or New.
So it you need to paint the house – replace the bathroom – or add a shed, you may as well do it when best suits you.
Plus you may even get some personal use out of it to make your life a little better.
Hope that helps and if you have a PPoR that you’ve just turned into an investor I’m here to help out with the tax depreciation reports.
I’ve got even more info on PPoR rental properties on this page here www.wrcqs.com.au/my-principal-property-is-now-a-rental-property/
-End-
All that can be quite confusing, so if you too have some money that needs spending on your Investment property, feel free to ask me when is the most tax advantagous time to spend it.
You can ge tin touch with me here www.wrcqs.com.au/contact-us
William Callaghan
WOULD YOU DO WHAT THIS INVESTOR DID TO A GOOD TENANT?
by William Callaghan
I was watching the tele this morning when a news segment came on about ‘evil landlords’
Well… agents really.
Apparently agents are kicking out good tenants for no reason – just so they can relist at far higher prices.
I don’t know about you but… not all money is good money
Our family has 5 rental properties – none of which are maximising rent return.
-but we don’t care either
The tenants have all been in-place, paying their weekly rent without fail, year on year.
So why would we punish them? It’s just not cricket.
Are we wrong to look at investing like this?
William Callaghan
THE CRAZIEST TAX DEDUCTION INVESTMENT PROPERTY BUILDERS TRY TO CLAIM
by William Callaghan
As you can imagine I know a lot of accountants and a few weeks ago I put a question to them:
“What’s the craziest tax deduction your builder clients have tried to sneak past you?”
The accountants did not disappoint
I kid you not, this is straight from the horse’s mouth(s)!
And although there were some really funny ones, like Swimming lessons for the kids, an excavator- that was actually a fishing boat and ‘tools’ from Sexyland – the funniest by far was this…
And it was claimed by multiple builders up and down the east coast.
Here it is:
A boob job for the wife – who does the books for the business
Yes, every year builders all over Australia really do try to inflate their deductions by making fake claims.
But sharp eyed accountants always catch them out… and save their bacon… Because the ATO won’t be so cool about it.
Although you can’t claim a boob job as “repairs & maintenance” in your tax depreciation report- there are loads of legitimate items you can claim.
If you’ve got any questions about what you can and can’t claim – tax your depreciation report – simply email me here www.WRCQS.com.au/contact-us or reply to this email
William Callaghan
CAN YOU CLAIM MORE DEDUCTIONS THAN YOUR HOUSE IS WORTH?
by William Callaghan
A new client sent me an interesting question over the weekend…
He’s just purchased a rather fancy house built mid 2000’s – but at a bargain price.
The baragian price is because it’s in Mackay. Where prices have been slaughtered by the death of the mining boom.
His question:
++++
“I bought the house from the original owner for $440,000. A lot less than the $580,000 he paid for it in 2008.
…Can I claim the deductions on the original price or do I have to use the price I paid for it?”
++++
This is a very good question. And very timely.
With the widespread ‘threat’ of property prices dropping 30% or more, maybe you are wondering the same thing.
Or maybe not. If you don’t care, just stop reading now and enjoy the rest of your day.
For the rest… onwards:
Tax Depreciation, deduction values are split into 2 categories.
1. The ‘as built’ cost for Capital Works (structures, painting, repairs, renovations, etc).
And 2. the ‘market value’ cost for the Plant & equipment (carpet, appliances, air con, etc).
oh, and the Land, Stamp Duty and Legal fees are never claimed in the depreciation.
But back to my new clients question…
The house cost $350,000 to build in 2008 + $30,000 for hard landscaping + $200,000 for the land (according to p.o.). So he can claim the full $380,000 at 2.5% pa.
That’s $9,500/yr in tax deductions.
So despite the property value dropping about 25% he can still claim the full 100% of the original build cost.
If you’ve got an investment property – or a friend who has one – and don’t want to pay more tax then you should… feel free to get in touch here www.wrcqs.com.au/contact-us for a free quote – eyeball estiamte of deductions – free rental appraisal report – free suburb performance report – and free report about your property.
Or not. Either way I’m here to help.
William Callaghan
OWNING AN INVESTMENT PROPERTY IS A BAD IDEA:
by William Callaghan
If you make your crust from buying / selling / renting or owning property this may rub you the wrong way.
Owning property is a massive headache and no one should do it!
>>Good deals are only ever found after pouring your soul into market research and door knocking.
Plus, the government (doesn’t matter which colours they fly) want to milk you of every cent of profit they can. And they get away wiht it by stuffing full-with-cash, the pockets of enough voters (who aren’t like you) so that they can’t get kicked out of office – by voters just like you.
So Property people get royally screwed.
That is… unless… you follow 3 basic rules to investing
Here they are:
1. Always use a professional Property Manager to look after your Investment. (Outsource your frustrations to a professional)
2. Always use an Aaccountant who knows property tax. (Maximise tax tricks)
3. Ensure you’ve claimed every possibles tax deduction you can. Agent fees, land tax, yard maintenance and of course your TAX DEPRECIATION of the building and assets
Of course, this is where I put up my hand and offer to do the tax depreciation reports for you and your clients – should you not already have them sorted.
In which case, simply reply to this email or get in touch with me here >>> www.wrcqs.com.au/tax-depreciation-hq/
William Callaghan
YOU MAY JUST HAVE BECOME UNDER INSURED… HERE’S WHY:
by William Callaghan
Build prices have gone sky-high in the past 6-months and that means your house may now be insured for less than replacement cost.
This is not a good thing – but can be remedied
What to do:
First ask your insurer if they’ve accounted for the sudden increase in build costs – some examples below.
And if they haven’t I’d be having your policy adjusted.
Seeing how I work with builders and tradies every day, I’ve got the goss on what the tradies are charging.
Here’s my thoughts:
1. I don’t know a single builder making any money on their current builds.
…Most will barely break even. Many will run at a loss and hope to make up for it on the next one.
Yet
2. I know every single tradie is making a killing
And that’s not good for anyone.
Cost to lay a brick in 2019: $1.10
Cost to lay a brick in 2022: $3.50
Day rate for a tiler in 2019: $500
Day rate today: $1,000
Carpenter hourly rate in 2019: $65
Same carpenter in 2022: $120
Roof a house in colorbond in 2019: $25,000
Roof a house today: they’re unicorns and can’t be found
>>All this means there’s a lot of houses out there for sale at below replacement cost & even more insured well below.
I happen to also prepare Insurance Replacement Valuations for houses & buildings – at the going market rates – and can do so for you too.
But only if you really need it. No need to waste money in today’s economy.
If you’d like a quote for an independent insurance valuation just hit me up here
https://wrcqs.com.au/contact-us/
William Callaghan
WHERE I MAY BUY MY NEXT INVESTMENT PROPERTY:
by William Callaghan
I may not be the greatest investor – but I do like to keep an eye on suburbs I’d be happy to live in.
Afterall, if you’re happy living there, it can’t be a bad investment…right?
And there may be faaar better places to invest than this one. But I like it.
Anyway:
Here’s where I may buy next. It’s not some trendy inner city ‘burb or hipster coastal locale – like Palm Beach, Miami Beach Casuarina Beach.
It’s not even close to Westfield. (though it is about 15 minutes from 2 Westfields).
The Pro’s are good though:
1. Close proxim. to one of Australia’s largest industrial precincts
2. 20-minutes drive from a world heritage marine park
3. Easy access (10-min drive) to the major commuter train line
4. Even easier access to the East-Coast Major hwy. You can literally be in the Brisbane CBD, over the NSW border or well on your way to Toowoomba in under 40-minutes
Ok, enough teasing…here’s the suburb (micro suburb) I’m keen on…
Norfolk Village (Ormeau).
This development was built in the 90’s and I remember watching go-up while heading to the beach on the ‘old M1’.
Back then 90’s-2010 it was a fresh, young suburb and about as out of the way as Yarrabilba is now.
2010-2020 it was a bit rundown and shady – but it’s really coming on strong now.
The new local Councillor – Mark Hammel – has used force-like skills to get a whole lot of funding thrown at local area upgrades. And it’s showing.
I could go on all day about the potential Norfolk has as an investment opportunity, but here’s what really matters…
What would I buy/build?
Well, I’d be aiming at the dual-key setup. There’s some big families in Ormeau and Dual key is the way to go.
But there’s no more land… so I’d buy an existing and pop the roof off.
Build a second floor (second dwelling), ensure there was enough offstreet parking for at least 5 cars and pull in the big bucks in rent return.
That’s what I may do anyway. You can do what you like of course.
But if you’d like to see what kind of deductions you can get on a similar property to the one I jsut mentioned, reply to this email or go here www.wrcqs.com.au/contact
William Callaghan
TRUMP’SS SECRET TO SUCCESS:
by William Callaghan
And you can use it too!
Forward: this is not a pro trump rant. But it is pro money making.
Love him or hate him, Trump knows how to make money. Hand over fist.
The very fact he’s one of the only high ranking Americans Putin hasn’t black listed from Russia says a lot.
Doesn’t seem to matter if he’s in a hospital bed hocked up on experimental drugs or on the campaign trail – trump makes money every second of the day.
That’s because he used basics and advanced basics to grow his wealth. And now it grows itself.
Back in the day Trump was a realestate agent and made tons of money. But like any job if you don’t show up to work you don’t get paid.
So he created income continuity.
He became a Landlord. And he did it over and over again. Buying more and more profitable properties each time.
Now:
There’s only 4-ways to make money in property. Trump (and many others on the Forbes 500 rich list) mastered the skill.
1. Buy low…Sell high
2. Buy medium…hold for 15+ years
3. Buy high…hold for 30+ years (blue chip property)
4. Buy commercial and charge a fortune for rent
I’m no property gooroo -my for and against record is testament to that.
So I too do the basics and advanced basics…just in tax depreciation and capital gains tax reduction on IP’s.
EOFY is shockingly close (again) and now is the time to strike if you haven’t yet sorted out your tax depreciation report.
To get a quote simply hit me up here https://wrcqs.com.au/contact-us/
William Callaghan
WHAT’S BETTER: ONE BIG FAMILY OR TWO SMALL ONES?
by William Callaghan
What would you prefer: renting to one big family or two small ones?
Big Houses (5+ beds) are in hot demand and virtually have a 100% occupancy rate.
-unless of course you charge stupidly high rent…then you may have issues.
But still…with high demand comes opportunity for higher rent.
While Small houses (1-3 bed) are way more common – and can be harder to fill. And you have to be more competitive with your pricing.
Plus two 2-3 bed houses cost way more to buy than one 5-bedder.
Only to return slightly more rent.
Enter the Dual-Key:
A dual-key house (2B + 3bed) costs pretty much the same as a large house (5bed) and needs about the same amount of land.
Plus the rent return is about on par too.
Maybe even better.
Maybe best if all though is the flexibility.
• if one tenant moves out you’ve still got income coming from the other
• often one big family will rent out both ‘keys’. Grandparents in the 2-bed side. Parents and kids in the bigger side.
• At a pinch you could live in one half while renting out the other
If you’re interested in a brand new dual-key, I have a contact who sends clients to me. His name is Jack and he specialises in selling brand-new dual-key investment properties.
I have no idea what he has on the books right now. He may have nothing. I didn’t bother asking.
But if you are somewhat interested, He’s the man to speak to.
I can provide a sample depreciation report that’s based on one of his recent builds and if you’d like to see what the deductions are like on a brand new dual-key I’ll happily send you aa copy.
Anyway, here’s his site:
Jack: Beanstalk Property Investments
Note: I should have said this earlier but…i gain no financial benefit from Jack. It’s really important for Property Investors to have good contacts – and Jack is a great contact.
William Callaghan
LESSONS FROM A DIS-INHERITED SOLDIER’S WIFE
by William Callaghan
One of the biggest influences in my life has been my fiery, pint sized grandmother
5-foot nothing she was.
She lived through some hard times.
Eloping with my grandfather from her family farm in Kingaroy on a stormy summer night.
Getting married a few days later in the Cathedral in Toowoomba.
She was forbidden to marry him as he wasn’t good enough. So her parents wrote her out of the very sizable will and never spoke to her again
Before waving goodbye to her brand-new husband as he set sail for the mountainous frontline of the New Guinea battlefields.
For three years she worked double shifts in the Pauls factory (West End) bottling orange juice.
For three years she slept in the lunchroom between shifts.
-It was easier to live at work than to go home for a few hours sleep.
For three years she received the occasional letter from my grandfather saying “how friendly the fuzzy wuzzy ladies were”
That juice burnt the skin of her polio ridden body deep down. Even into her 90’s she had the acid burn scarring.
And for 20-years after the war she lived with my grandfather who nearly (accidentally) killed her in his sleep. Over and over again.
You see, Grandad had to fight hand to hand combat with Japanese special forces in the jungles. Day and night. Blistering humidity and pelting rain.
(the stories he told me…But that’s for another time)
He survived. But was forever tortured.
If grandma moved the wrong way in bed while he was sleeping he of course thought the enemy soldiers had come to get him.
(he kept a box of live grenades, motars and bullets under the bed…just in case)
Tom was over 6-foot tall and had massive hands – borrowed from a silverback gorilla i think – so she stood no match.
It was the job of my mother, her two brothers and sister to wake him and save her.
She learnt a few survival tricks in that time.
So when she spoke, I listened.
When she had an opinion on life and tough times I listened even harder.
When she did ‘odd things’ I didn’t question her.
But perhaps the most odd thing was how many times she re-used the same piece of gladwrap.
She’d use it. Wash it. Dry it. And use it again and again and again.
Waste not want not she’d say to me.
Now when I see all the doom and gloom and fear mongering on tv about high-inflation, low-inflation, stagflation and such – i do exactly what she told me to do.
Turn off the tv and get on with it.
Because that’s exactly what she did. She got on wiht it and left this world with 4-kids, 11 grandkids and $20m in property. Not bad for someone who started out adult life with a suitcase of clothes and nothing more.
#dontforgettovoteonsaturday
To learn more about the ADF’s veteran help here
https://www.dva.gov.au/civilian-life/veteran-support-officers
William Callaghan
ELECTION PREDICTION: NO MATTER WHO WINS, CHANGES ARE AFOOT
By William Callaghan
Regardless of who wins this election I’m predicting big changes in the taxes around property
With the Boomer generation set to transfer trillions of dollars (assets) to their children and grandchildren -there is no way the government (whomever it be) won’t want a piece of that action.
Maybe it will be lowering the threshold on Land tax and upping the land tax rate. Meaning the beneficiaries pay taxes through the nose.
Maybe it will be scrapping the CGT grace period when you inherit and on-sell a property
Could even be both!
…or the Death Tax may be back.
Who knows what exactly- but it will be something.
It probably won’t happen in this election cycle but definitely within 10-years
…as the government (of any creed or colour) will not let all that wealth transfer without getting their slice.
I really hope I’m wrong about this so let’s see how well this prediction ages.
William Callaghan
THE NIGHT I MET KURT COBAIN
By William Callaghan
WARNING: bad parenting moment ahead
Between getting arrested for continually forgetting to pay the bus fare on the Brisbane public transport network – my eldest brother was also a mad keen Nirvana fan. Along with Iron Maiden, Deaf Leppard and many more.
He was in fact a drummer in one of those heavy-heavy metal bands where the singer just screams like a banshee into the mic.
Well, back in 1993? Mum and Dad were on vacation and 17-year old Tom was left in charge.
Knowing Nirvana were playing on the Coast (big day out I think) and desperate to see Kurt he had a plan.
Not one to be put off by having no licence, no car and living nowhere near the coast, he dragged me along to stalk Kurt’s hotel and to ride the elevator.
Sure enough the unshaven Kurt Cobain eventually stumbled into the lift for a night out on the town -for what I’m sure was just relaxed, upstanding entertainment.
There I was, face to face with the great man himself.
What did he say you may ask?
“Am I larger than life?”
To which I said nothing!
I was 12 afterall. In the lift of a highrise building somewhere on the coast well after dark – and confronted by a huge American and his heavies.
My brother on the other hand said “Not really”
And that was that.
What does this have to do with Tax Depreciation you may ask?
Nothing.
But if your clients ever buy an investment property in a Gold Coast highrise, be confident in knowing I know how to get there.
William Callaghan
THE EEEDIOT INVESTOR: AND HIS WIFE (MY HUGE FAILS AT INVESTING)
By William Callaghan
Rule #1:
Don’t ask me for investing advice.
Here’s why:
Back in 2001 my brother offered me his 100% original HK MONARO 307 V8 GTS for $7,000
My then girlfriend said “TAKE THE MONARO!!”
I said nah, I need a Ute.
Idiot.
I could have since sold that car for $200k maybe more.
Instead I bought a dumpy Hilux for $7,000 spent $5,000 on the motor when it blew up and sold it for $4,000 three years later.
Idiot.
Then in 2005 (now my wife) she told me we should buy a $64k house on the Main Street of Beenleigh.
I said what the hell do I want a rundown old post war home in beenleigh for?
Idiot.
It got rezoned high-density and sold jsut 4 years later for $1,000,000
And since sold again for close to $2m
Idiot.
Then there was the house we actually bought.
She said “no, no, no, NO!”
So I bought it!
$150-$200k in renovations and holding costs and 10-years living in a ‘difficult’ house we sold it for slightly more than what we paid for it.
2-years after we sold it the new owner doubled their money.
Idiot.
So when we pulled the trigger on a brand-new build I wiped my hands of it.
I said to Tami “you choose the land, you design the house (with the help of her award winning architect cousin) and I’ll choose the builder”.
Surely I couldn’t stuff that up…?
Happy dayz!
It all worked and I learnt my lesson:
Listen to your wife when it comes to investing
Clearly I am NOT the person to ask about maximising Capital Growth – on any type of investment.
But I can depreciate the heck out of any investment property!
So if you’ve got another rental and you want to pay less tax – just shoot me an email here https://wrcqs.com.au/contact-us/ and I’ll do my thing.
But… if you want to know WHAT to buy just ask my wife.
Just don’t expect a glowing response if you don’t listen to her 😉
William Callaghan
NIGHTMARE ON RENTAL STREET
By William Callaghan
What happens when a tenant refuses to leave?
I’ve come across a few in my time and it ain’t pretty
Here’s the short version of what happened to one client:
”We purchased our first property interstate (QLD) to be our PPOR but it came with existing tenants.
So we gave 3-months notice.
But the date to vacate had come and gone and the tenants refused to move.
Our PM followed protocol and lodged for a tribunal – but received no end of abuse from the tenants.
The tribunal process was set to work – though it meant 3 more months of the tenants ‘squatting’ – us losing money and stressing out big time (if it really did take 3-months, then we were also up for Stamp Duty…because it would be over the 6-month threshold for PPOR stamp Duty concession).
So we offered them $4,000 cash to get out by the end of the month and they took it…eventually”
Yikes!
The thought of offering a huge cash incentive to nightmare tenants just to kick their asssses out of your own home doesn’t sit well with me.
but…as my grandmother would say “do you want to be right or do you want to be happy?”
Now:
Some of my clients already have landlord insurance. Typically through TerrySheer.
So I checked them out and saw they actually cover you for up to 28 weeks rent if tenants fail to vacate and fail to pay the rent, after a court order.
Not saying you’ll be interested in that sort of protection, but if you are, here’s the link…
TerriSheer Insurance
William Callaghan
HOUSE PRICES COULD RISE 2,102%…AGAIN
If you play the waiting game
By William Callaghan
I come from a family of property investors.
-but they don’t play the buy and sell game.
They play the buy and hold and hold and hold and hold some more game.
-An interesting concept for some investors
But like Einstein says, the best way of teaching is through example
Here goes:
I spent my Easter Monday pouring over historic house sales on RpData.
Crunched a lot of numbers – it’s my vice.
And came up with proof of concept.
- Houses owned for 20-29 years go up (on average) 878%
- Houses owned for 30-34 years go up (on average) 1,042%
- Houses owned for 35-44 years go up (on average) 2,102%
Yes, the media is spruiking doom and gloom for property prices.
The AFR (via Westpac mouthpiece) says property will actually fall 14% by 2024
Maybe they’re right. Maybe not.
One thing is for sure:
The news media are fear mongers
But history is a great indicator of the future. And history shows house prices only ever go up (over time).
Limitations & Parameters:
1. I have a life, so I didn’t spend more than 4hrs on this data subset analysis.
2. I only looked at free standing residential on freehold land
-so no units and no bodies corp. arrangements
3. I didn’t go back beyond pre-Aussie dollar prices
-1979 sales was as far back as i went
4. I broke the data into 3 age brackets for sales-price comparisons
20-29 years
30-34 years
35-44 years
5. I only looked at 5 suburbs (of personal interest to me) within greater Brisbane
Rochedale South
Cleveland
Greenslopes
Darra
Chermside
6. Some houses were significantly renovated – others were like time warps.
***
This is not any sort of financial advice, merely an observation of the past.
So do with this info what you will
William Callaghan
RE: TAX DEPRECIATION REPORTING
By William Callaghan
A question came:
How do I maximise my deductions and keep you ATO safe?
ANSWER: This is one of the most asked questions of me as a Quantity Surveyor. So here’s my pre-loaded answer.
- 1. Under claim your deductions (not ideal if you want to improve your cash-flow) but it will keep you ATO ‘safe’.
- 2. Get the right QS and Accountant in your corner
…A QS who knows the depreciation rules backwards, forwards and sideways
…A QS who is prepared to squeeze every-last-cent of deductions out of your property, even if it means spending more time than it’s worth on your report
most importantly:
An Accountant who is every bit as good…if not better…than your Tax Depreciation Quantity Surveyor.
Oddly, that response has chased away a lot of potential clients who use mass volume ‘tick and flick’ kind of accountants.
William Callaghan
HOUSE FLOODED…WHAT TO CLAIM
By William Callaghan
Came a question from a flooded client:
“…earlier this year you did a depreciation report for me in Pimpama. Unfortunately the house was flooded and we’ve had to rip out the interior. How does this affect my new depreciation report?”
Snippet of my answer:
“…everything that was destroyed can have its remaining value written-off at 100% as a ‘scrapped item’.
So say the carpet had $2,000 worth of value left in it – you can claim that $2,000 as an instant write-off in the 21-22 FY.
Same goes for the plasterboard, paint, doors and so on.
It’s all claimable as an instant write-off.
As for the insurance part…
I can’t include the new items in the report as technically you haven’t paid for them.
…Just make sure you are claiming your insurance premiums as a deduction though.
But:
Any other items you had to buy but insurance didn’t cover can go in the report too.
Some may be deducted as per the normal deduction rates. Some may be claimed at 100% write-off as ‘repairs and maintenance’
Just let me know and I’ll sort it out for you….”
*****
If you ever have a flood, fire or general insurance claim remember the depreciation report needs adjusting.
The reason is two-fold:
- 1. it will ensure it remains relevant for use by your accountant
- 2. it will maximise instant deductions (so a better tax refund for you)
If you have any questions simply reply to this email
William Callaghan
RIPPED OFF $10,665,900
By William Callaghan
Last week a client warned me of how he was ripped off by an advisor.
It cost him $10,665,900
Here’s what happened:
Brad (name changed) sold a commercial property in the heart of the CBD.
A family owned investment since 1982.
His property advisor said it’s worth $9m so Brad pulled the trigger and sold for $9.1m
But what happened next was terrible, probably not ethical and definitely grey-hat stuff.
The buyer on-sold the property the very same day for a $10m profit.
More than double what he’d paid Brad for it just 4-hrs earlier.
Takeaway:
Always seek the best advice you can afford.
Be it your Accountant, your Quantity Surveyor or even your Real Estate agent.
The good ones work for ‘free’
…a lesson Brad has just learnt the very hard way
Talk soon and stay sharp
William Callaghan
HOW LATE IS TOO LATE FOR A DEPRECIAITON REPORT?
By William Callaghan
“Is it too late to claim depreciation?”
That’s a very common question I get.
…Especially when someone just changed accountants (and the old one didn’t bother to tell them about depreciation entitlements).
The short answer is it’s never too late.
One Caveat:
Wait more than 2-years and you could be losing out on big deductions.
You see:
Until about 7-years ago the ATO would allow you to retrospectively claim deductions as far back as your accountant wanted to go.
This was brilliant for life’s procrastinators.
But the ATO wasn’t a fan.
The extra paperwork and tax refunds they had to issue didn’t sit well with the bean counters.
So they stripped you of the privilege.
Now you can only claim back your tax refund entitlements for the 2-previous financial years + the FY year you are in.
So, if you’ve got an investment property that doesn’t have a report in place yet, you should act ASAP and avoid being blocked from claiming your refund entitlements.
Talk soon and stay sharp
William Callaghan
