Section 50?

D

Dorff

Guest
We have two mortgage-free rental properties, combined income appr. 16K p/a., a home mortgage (tracker) of 160K, which we hope to reduce by 40K when SSIA's mature in May '07.
What would be the advantages or otherwise of buying a section 50 property (after reducing the present home loan), to offset tax on the rental income?​
 
A section 50 investment will allow you to use a certain portion of the acquisition cost for offset against the rental income from that property thereby creating a large rental loss in the first year. This loss may be used against other rental income and then the excess carried forward. Thats is the basic mechanics of how it works. You would need to run the figure and see what tax savings it can achieve for you but remember other issues such as section 50 properties are usually more expensive etc... dont just consider the automatic income tax savings
 
The great advantage , apart from the tax incentive, is that the management company looks after the running of the place, tenants, repairs etc.
 
rabbit said:
The great advantage , apart from the tax incentive, is that the management company looks after the running of the place, tenants, repairs etc.
Click to expand...

Just as well, some of the section 50 properties have four bedrooms all occupied by students!:D

I presume there is a further charge for this service and that you'd have to cough up for the repairs?

As Bazermc says, section 23 and 50 properties are usually more expensive, although I've seen some advertised that were an attractive price for the size. I think if I had two mortgage free properties I'd be looking at ways to cut the tax bill too. As a matter of interest why are these mortgage free, while your PPR has a mortgage?
 
"As a matter of interest why are these mortgage free, while your PPR has a mortgage?[/quote]
Have owned the two properties for years; we lived in one of them until recently, when the chance of a much better home at a reasonable price came up, and we took out the mortgage to buy it, while holding on to the other two properties.
 
liteweight said:
Just as well, some of the section 50 properties have four bedrooms all occupied by students!:D

I presume there is a further charge for this service and that you'd have to cough up for the repairs?
Click to expand...

In one scheme that I am aware of, it is 15% of the annual rent. For that everything is taken care of.... all maintenance, management, repairs, upkeep, problems, bills etc
The landlord could live happily in Timbuctoo, he / she just gets 85% of the rent , paid in 3 lump sums each year.
 
Dorff said:
"As a matter of interest why are these mortgage free, while your PPR has a mortgage?
Click to expand...
Have owned the two properties for years; we lived in one of them until recently, when the chance of a much better home at a reasonable price came up, and we took out the mortgage to buy it, while holding on to the other two properties.[/quote]


suggestion
refinance the PPR mortgage by getting loan secured on investment props, that way you can claim interest relief on the 160k outstanding debt against your rental income, i.e. 160k @5% int rate = 8k interst, you cac write this off as an allowable expense against your rental income so you would only have tax liability on 8k rent inc, less maintenance costs etc..might be cheaper than buying a S50 prop

also have the benefit of having your PPR unencumbered
 
You must log in or register to reply here.
Back
Top