Forget the Budget – Bourbon’s Running Dry…
I know…… I Knoooooowwww… the only thing that gets me through the fact that we are $600 Billion in debt is by drinking bourbon, and now that looks to be a pleasure of the past. In fact, alcohol, gambling and cigarettes are three industries that thrive in tough times… it seems we all turn to the little pleasures in life when things get tough.
So we had Joe Hockey’s first budget and yes it was a mixed bag, full of cuts and big spending.
So as promised, this is my take on it – feel free to comment and let me know what you think.
Firstly I would like to say that yes, the Budget affects me just like everyone else and I pay an absolute ton of tax per annum through:
- Income tax
- GST
- Company tax
- SMSF tax
- Stamp Duty
- Capital gains tax
This is a number of such size, per annum, I wish not to even work it out… Just thought I would chuck that in before anyone says I don’t contribute my fair share…
But this Blog is not about that. We are going to have a look at how property investors are, or could be, affected or benefitted by the Budget announcements. And a few other topics… like Bourbon.
Before we start, I am also happy NRAS was abolished… it was a “scheme” that thousands of investors were ripped off on. I will keep you posted on how badly these house sales perform in the future…
So since the announcement of the Budget, there have been some very clever numbers people (accountants and the like) working out ways to dodge the extra levies that are going to be imposed. And it’s not just high income earners that will be affected. Imagine this:
You have an income of $100,000 and have owned an investment property for 10 years. This property has increased by $200,000 and you decide to sell it. The gains made by this property could well put you over $180,000 threshold where the new levy starts. What this means for you is that you could now have to pay the levy on top of your income tax for that year. It also means that the CGT percentage payable on that sale could now be higher due to the levy. A double Whammy!!!
But on a positive note, those salary earners who earn more than $180k per annum may be able to salary sacrifice more into Super ($30k per annum from July) or salary sacrifice a car to reduce their income so that it falls below the $180k mark. Therefore avoid paying the levy.
For current investors, Family Tax Benefit Part B has been wiped off. This means you need to make sure that if your tenant receives this Welfare payment, then you need to ensure they can still afford the rent they are paying or their ability to afford your rent when it increases. The easiest formula to use is net income per week divided by three = maximum rent they can afford. This figure needs to be $30-$40 per week higher than what you are receiving in rent so that you know they can afford the rent when your rent goes up.
Now the Canberra property market is in for some rougher times ahead… property values will take a hit over the coming years with 16,500 government workers losing their jobs in the next few years. This cull will also affect yields on offer and potentially the vacancy rate. Could be a market to keep an eye on in years to come, to snag a bargain.
If one thing has become apparent in this Budget – it’s that you need to gain great accounting advice if this in any way could affect you.