Research shows that the median house price in Brisbane in 2000 was $173,000, rising to $445,562 by 31st December 2009. This equates to a rise in capital value in the last 10 years of 257.5%!
The question I hear a lot is “What about the Global Financial Crisis – hasn’t that stopped that growth?”
The simple answer is No.
Over the past 12 months, Brisbane house prices have risen by 12.1%! Wouldn’t you want to get growth like that on your money and if you did, wouldn’t you like to get a tax advantage at the same time?
Borrowing to purchase an investment property is one way of take advantage of those tax benefits. However, when borrowing, there are three types of investment gearing you can accomplish – positive geared, neutrally geared or negative geared.
A positively geared investment is when the income generated (rent and depreciation deductions) are greater than the outgoings (interest payments on the loan and property maintenance costs). A neutrally geared investment is when the income is equal to the outgoings and negatively geared is where the income is less than the outgoings.
There are pro’s and con’s to each option and it depends upon your long term strategy, incomes and goals as to which is your best choice.
To give you an example of the benefits of property, one of my clients was paying about $26,950 in tax prior to the purchase of an investment property. After buying an investment property and taking into account depreciation deductions and other tax entitlements, his tax liability was reduced to $20,736 – a reduction/savings of $6,213.40.
Remember that arranging correctly structured and priced finance is a specialist job and a quality broker is worth their weight in Gold, so find someone highly recommended. If you are having trouble with this, let me know.
Time is running out if you are planning to make investments while reducing your tax liability before June 30th. Remember, this is all about leaving the workforce one day, so implementing your structure sooner rather than later needs action now.
If you are concerned or just keen to get moving on something we are here to help. Speak to one of our certified financial planners on 1300 55 10 45 or email info@intellichoice.com.au. Visit www.intellichoicefp.com.au for more details.
