Labor’s negative gearing policy was announced in February 2016. Whilst there has been much debate about the merits of negative gearing and whether negative gearing should be abolished, Labor’s decision to make substantial changes to negative gearing and capital gains tax discount has been controversial. But how does it impact Australian Expats? Craig Joslin, the founder of The Australian Expat Investor, explores the issue.
Did you know that every year people just like you lose money, by not understanding their rental property depreciation entitlements? People short change themselves by not using these rental property tax deductions effectively. Well this article may help you avoid this, and assist you in getting the most out of your tax return. So first of all what is depreciation? Depreciation Depreciation is basically the decline in the value of an asset that you can claim as a tax deduction against your income. To give what could be a more familiar example, after you purchase a car it loses value over time due to various factors including wear and tear. This loss of value is called depreciation. Similarly, your rental property (being the building not the land) starts losing value from the time you purchase it, again due to various factors including wear and tear and the limited life of various fittings and appliances (eg. Hot water systems and… Read More
If you are an Australian citizen or permanent resident contracting in the and seeking home loan finance for an Australian purchase, MAP can assist. Contractors in the UK may be working via their limited company and even making use of offshore structures to minimise tax payable in the uk. These sorts of structures are not common in Australia as the operation of the PSI rules essentially makes these structures no more tax effective than just sole contracting in ones own name. As they are not common in Australia many lenders will not lend based on this income unless 2 years overseas financials and tax returns can be provided. If you are using one of these tax effective structures then your taxable income will not reflect your true income and most banks will not lend to you. There is 2-3 lenders however that will see through this structure and essentially follow the money. Providing they can see your employer paying your… Read More
What is a favourable purchase? As ones parents or grandparents get closer to retirement, they may wish to sell their property to either downsize or move into an aged care facility/retirement living. Many children do not like the idea of mum and dad selling the family home so will look at purchasing the property to keep it in the family. In this case sometimes the parents will agree to sell for under market value to assist their kids financially and also with the view to keeping the home in the family. When a property is sold for under market value to a family member, this is called a favourable purchase. Essentially what is happening is the parents are gifting equity to the child. For example, if the purchase price was $400,000 and the valuation was $500,000, the parents are basically gifting the kids $100,000 in equity. Can you get a home loan for a favourable purchase? Absolutely, although different… Read More
If you are living overseas you will be required to provide certified witnessed copies of ID and certain other supporting documents when making a home loan application to purchase an Australian property. Depending on the State of Australia you are purchasing in, you may also be required to have your signature on the mortgage document itself witnessed by an authorised person. Who can certify/witness the documents? Lawyer, Notary public, Consular official, JP or CDEC, Police officer if in Australia What are the requirements for a document to be satisfactory certified? It is not just sufficient that the document is certified, we also need to be able to confirm that the person who has certified the document is who they say they are. To ensure this is the case; An Australian solicitor needs to provide full name and State of Australia they are registered in (MAP can then do a search of the records to confirm), JP/CDEC needs to provide their registration number… Read More
1. Home Loan options from 35+ major and minor lenders Many mortgage brokers claim to know bank policy but in reality favour 1 or 2 banks. And if you go into the branch the bank manager is not going to tell you the bank down the road has a cheaper interest rate and fees. At MAP we know bank policy, procedure and interest rates for over 35 lenders ensuring you get the bank and home loan that is right for you, not the one that is right for your bank or broker. 2. Up to 90% LVR for Australian citizens living and working abroad Map knows lender policy back to front on Australian Expat Home Loans as this is what we specialise in. We can arrange up to 90% LVR and sometimes 95% for Australian Expats who have stable employment and clean credit history. See the advantages of a 90% LVR and an explanation of lenders mortgage insurance. 3. Experience: With over 100 million… Read More
Offset Accounts v Redraw Facility or LOC There are many methods for Australian Expats living overseas and those on Temporary Resident or Spousal Visa’s to pay their home loan (mortgage) off earlier. Over the coming months I will explore a few of these but this month we are looking at using an offset facility v a redraw facility or line of credit (LOC). What is an offset account What is a redraw facility, What is a line of credit facilty (all in one account). What is an Offset Account? An offset account is generally a standard transaction account that you would normally use to have your pay deposited into and pay for your groceries, fuel etc by using the debit card attached to the account. This transaction account becomes an offset account when it is attached to a home loan and is said to “offset the interest in that home loan”. To understand this it is important to note that… Read More
Negative Gearing This week I thought I would discuss briefly negative gearing and how it applies to expats living overseas. What is Negative Gearing? Negative gearing is basically when an asset such as an investment property is purchased and the income from that property (rent) is not enough to cover the holding costs (interest on loan, rates, maintenance) so that an annual deficit or negative is created. Essentially, at the end of year 1 the costs of the property outweigh the rental income received from the property. If you lived in Australia earning AUD then you could potentially write this loss off against your salary reducing the income tax payable. Eg, if you had a salary of $80,000 and the loss from your rental properties was $10,000 then your taxable income would be $70,000 thus resulting in less income tax. Negative Gearing as an Expat: If you are an expatriate earning overseas income and therefore… Read More