Impact Taxation and Financial Services Pty. Ltd. is a CPA Practice based in the Bankstown area.
Greater Western Sydney: Our services include, Individual tax return, Sole trader tax return, Company / Trust tax return, BAS returns, Fringe benefit taxes, Capital gains taxes, Tax advises and Book keeping.
Service Areas – Tax Return/Refunds
Tax Return Ashbury, Tax Return Bankstown, Tax Return Bankstown Aerodrome, Tax Return Bass Hill, Tax Return Belfield, Tax Return Belmore, Tax Return Beverly Hills, Tax Return Birrong, Tax Return Campsie, Tax Return Canterbury, Tax Return Condell Park, Tax Return Croydon Park, Tax Return Earlwood, Tax Return East Hills, Tax Return Georges Hall, Tax Return Greenacre, Tax Return Hurlstone Park, Tax Return Kingsgrove, Tax Return Lakemba, Tax Return Lansdowne, Tax Return Milperra, Tax Return Mount Lewis, Tax Return Padstow, Tax Return Padstow Heights, Tax Return Panania, Tax Return Picnic Point, Tax Return Potts Hill, Tax Return Punchbowl, Tax Return Regents Park, Tax Return Revesby, Tax Return Revesby Heights, Tax Return Riverwood, Tax Return Roselands, Tax Return Sefton, Tax Return Villawood, Tax Return Wiley Park and Tax Return Yagoona
Service Areas – Accountants
Accountant Ashbury, Accountant Bankstown, Accountant Bankstown Aerodrome, Accountant Bass Hill, Accountant Belfield, Accountant Belmore, Accountant Beverly Hills, Accountant Birrong, Accountant Campsie, Accountant Canterbury, Accountant Condell Park, Accountant Croydon Park, Accountant Earlwood, Accountant East Hills, Accountant Georges Hall, Accountant Greenacre, Accountant Hurlstone Park, Accountant Kingsgrove, Accountant Lakemba, Accountant Lansdowne, Accountant Milperra, Accountant Mount Lewis, Accountant Padstow, Accountant Padstow Heights, Accountant Panania, Accountant Picnic Point, Accountant Potts Hill, Accountant Punchbowl, Accountant Regents Park, Accountant Revesby, Accountant Revesby Heights, Accountant Riverwood, Accountant Roselands, Accountant Sefton, Accountant Villawood, Accountant Wiley Park and Accountant Yagoona
Service Areas – Tax Agent
Tax Agent Ashbury, Tax Agent Bankstown, Tax Agent Aerodrome, Tax Agent Bass Hill, Tax Agent Belfield, Tax Agent Belmore, Tax Agent Beverly Hills, Tax Agent Birrong, Tax Agent Campsie, Tax Agent Canterbury, Tax Agent Condell Park, Tax Agent Croydon Park, Tax Agent Earlwood, Tax Agent East Hills, Tax Agent Georges Hall, Tax Agent Greenacre, Tax Agent Hurlstone Park, Tax Agent Kingsgrove, Tax Agent Lakemba, Tax Agent Lansdowne, Tax Agent Milperra, Tax Agent Mount Lewis, Tax Agent Padstow, Tax Agent Padstow Heights, Tax Agent Panania, Tax Agent Picnic Point, Tax Agent Potts Hill, Tax Agent Punchbowl, Tax Agent Regents Park, Tax Agent Revesby, Tax Agent Revesby Heights, Tax Agent Riverwood, Tax Agent Roselands, Tax Agent Sefton, Tax Agent Villawood, Tax Agent Wiley Park and Tax Agent Yagoona
Service Areas – Sole Trader Tax
Sole Trader Tax Australia, Sole Trader Tax NSW, Sole Trader Tax Ashbury, Sole Trader Tax Bankstown , Sole Trader Tax Aerodrome, Sole Trader Tax Agent Bass Hill, Sole Trader Tax Agent Belfield, Sole Trader Tax Agent Belmore, Sole Trader Tax Agent Beverly Hills, Sole Trader Tax Agent Birrong, Sole Trader Tax Agent Campsie, Sole Trader Tax Agent Canterbury, Sole Trader Tax Agent Condell Park, Sole Trader Tax Agent Croydon Park, Sole Trader Tax Agent Earlwood, Sole Trader Tax Agent East Hills, Sole Trader Tax Agent Georges Hall, Sole Trader Tax Agent Greenacre, Sole Trader Tax Agent Hurlstone Park, Sole Trader Tax Agent Kingsgrove, Sole Trader Tax Agent Lakemba, Sole Trader Tax Agent Lansdowne, Sole Trader Tax Agent Milperra, Sole Trader Tax Agent Mount Lewis, Sole Trader Tax Agent Padstow, Sole Trader Tax Agent Padstow Heights, Sole Trader Tax Agent Panania, Sole Trader Tax Agent Picnic Point, Sole Trader Tax Agent Potts Hill, Sole Trader Tax Agent Punchbowl, Sole Trader Tax Agent Regents Park, Sole Trader Tax Agent Revesby, Sole Trader Tax Agent Revesby Heights, Sole Trader Tax Agent Riverwood, Sole Trader Tax Agent Roselands, Sole Trader Tax Agent Sefton, Sole Trader Tax Agent Villawood, Sole Trader Tax Agent Wiley Park and Sole Trader Tax Agent Yagoona
Service Areas – Company Tax
Company Tax Australia, Company Tax NSW, Company Tax Ashbury, Company Tax Bankstown, Company Tax Aerodrome, Company Tax Bass Hill, Company Tax Belfield, Company Tax Belmore, Company Tax Beverly Hills, Company Tax Birrong, Company Tax Campsie, Company Tax Canterbury, Company Tax Condell Park, Company Tax Croydon Park, Company Tax Earlwood, Company Tax East Hills, Company Tax Georges Hall, Company Tax Greenacre, Company Tax Hurlstone Park, Company Tax Kingsgrove, Company Tax Lakemba, Company Tax Lansdowne, Company Tax Milperra, Company Taxt Mount Lewis, Company Tax Padstow, Company Tax Padstow Heights, Company Tax Panania, Company Tax Picnic Point, Company Tax Potts Hill, Company Tax Punchbowl, Company Tax Regents Park, Company Tax Revesby, Company Tax Revesby Heights, Company Tax Riverwood, Company Tax Roselands, Company Tax Sefton, Company Tax Villawood, Company Tax Wiley Park and Company Tax Yagoona
Are you considering buying a property? Do you know you could miss opportunities to save thousands, or tens of thousands of dollars if you don’t plan well before the purchase?
Below are a few key considerations:
1. How should you set up your loan structure? If you don’t have a loan offset account for a rental property, after you make extra payments directly to the loan account, you can only claim interest deduction on the remaining balance of the loan. For tax purposes, this deductible balance can’t be changed even if you redraw the overpaid amount later. A good loan structure could also help you to stabilize interest rate and speed up loan repayment by combining a standard variable loan (with an offset account) and a fix rates account.
2. Timing of renovation. You might want to do a renovation right after you have bought the rental property. But do you know for any genuine repair & maintenance included in the renovation, you can claim an outright deduction against the rental income when the property is available for rental? If the work is done before the date when the property is available for rental, you can only claim the deduction against future capital gain when the property is sold. Depend on when you are going to sell, it could take years or up to decades before you can claim the deduction.
3. How should you split ownership? You might want to share the property ownership with a family member. For tax purposes, the percentage of ownership is based on the legal title, regardless of who is paying more on the mortgage. If the property will give you a tax profit, you might want to allocate more
ownership to the low-income earner to utilize the lower marginal tax rate. If it is giving you a tax loss, you might want to allocate more ownership to the high-income earner to utilize the loss. The goal is for the family to pay minimum tax together.
4. Should you use a family trust to purchase the property? There are many pros and cons related to a family trust. The advantages include tax savings on rental profit or capital gain, asset protection and succession planning on family wealth. However, family trust can’t distribute losses. All losses are trapped in the trust to be used to offset future trust profit. Therefore, you can’t utilize any rental loss in a trust to offset other income such as salary & wages. Family trusts also attract high accounting fees on initial setup and annual fees on financial statements and tax returns. State governments also charge much higher land tax on family trusts.
5. Will the income level change in future years for different owners? You might want to forecast the possible income for different owners to understand total tax payment / savings related to the property. This could also impact on your decision making on point 3 and 4 above.
6. Understand when you can treat your property as main residence to receive an exemption on capital gains tax. When eligible, even if you have received rental income, you could still treat your rental property as main residence and receive the exemption. To be eligible, you will need to treat it as your main residence at the beginning. Please check out this ATO link: Treating former home as main residence.
7. Decide whether you need to purchase a depreciation report. Most taxpayers don’t know that the depreciation on the building will need to be added back to calculate capital gains tax when the property is sold. When the property is held for more than 12 months, after applying the capital gains tax discount of 50%, it will effectively cut the tax rate by half at the time of sales. This makes depreciation deductions desirable for high income earners. However, for low-income earners it might not be ideal to claim depreciation as a rental deduction since they could be paying more on capital gains tax in the future. It could get more complicated if the property is under joint ownership between high and low income earners.
8. You might want to consider Centrelink payments for future or existing owners. Most Centrelink payments are income and asset tested. Before attaching a rental property to a family member who is receiving, or plan to receive government benefits, you might want to check the testing thresholds first to see if the Centrelink payment will be impacted. This is also applicable when you are making distributions from a family trust to different family members.
9. Have you considered using your SMSF (selfmanaged super fund) to make the purchase of a rental property? There are a lot of tax saving opportunities with a SMSF since the income tax rate is only 15%. And the capital gains tax rate is effectively only 10% after factoring in the 1/3 discount. The major downside with a SMSF is normally you can’t get the money out until you retire or on compassionate grounds (SMSF does have more flexibilities compared to normal retail super fund. But the choices are still very limited). It could be expensive to set up and operate a SMSF too. There are also strict legal requirements on the trustees. Penalties on incompliance could be severe. Tax law around SMSF is very complicated too. You will need to find a good tax accountant specialized in SMSF to help you to understand the structure, also do a cost-benefit analysis before setting it up.
10. Consider internal ownership changes. For your existing rental properties, you can also consider whether you should transfer the ownership between family members, or between different business structures (this is not applicable for SMSF). You might want to do this when the income level changes with family members, or rental property changes between tax profit and loss. Before the change, you need to consider the cost of transfer including capital gains tax, stamp duty, conveyancer fees, etc. Again, a cost-benefit analysis is a must before the change.
Last but not the least, did you combine all the above strategies and compare your choices? If you haven’t yet, how would you know that you have picked the best strategy to minimize your taxes? We can help you to factor in all considerations, compare different scenarios, also present you with a Property Prepurchase Report with all our findings to help you to make a decision. Contact us today to book in a consultation with an experienced tax accountant!
This is general advice only and does not consider your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek advice from your financial adviser and seek tax advice from your accountant.
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