Pursuit of the Tax Offset

Posted by Luke Graham

Given that Team Research (although exceptionally talented researchers) are not tax agents, this article must be taken as general opinion rather than advice. In light of this, if you believe that the content of this research article is relevant to your personal situation, you should combine the property knowledge of Blue Wealth Property with the tax advice available from your tax professional.

There are many reasons that people decide to invest in property. Some are included below:

For capital gains in the future

For the cash flow available from rental income

For the taxation benefits available through negative gearing

Purchasing with the intention of the property becoming their future home

There is significant debate on the best method, and the true answer lies within an individual’s circumstances. This is why there is always a need to have a trusted property investment professional help you on your journey. Those finding themselves following a particular facet too heavily could miss out on great opportunities.

At Blue Wealth, we often find people desiring an established (completed) investment property so they can claim tax offsets immediately. They have heard at social gatherings of Fred Jones, who has an annual salary of $300,000 yet doesn’t pay any tax because of his investment property portfolio. A soon to be completed project Blue Wealth provided to clients twelve months ago paints a very interesting picture …

Blue Wealth client

Fred Jones

Purchased: August 2013

Price: $490,000

Discount on 2014 (complete) price: $35,000

Purchased: August 2014

Price: $525,000

Taxable income offset: ~43,000

Tax credit: ~8,700

After tax cash flow: ~$3,800

What this table illustrates is that an investor who decides to purchase within a completed project can often be not only paying a premium but also selecting a ‘left over’ property. In this example, following tax offsets as the only benefit of property investment cost more than $31,000 in the first year. Not a good start.

This may not always be the case, yet often is. It is the role of Blue Wealth’s research team to ensure that if selecting completed properties, it represents exceptional value as well as having great growth prospects into the long term future.

Posted by Luke Graham, on 23rd Sep 2014