Is your property investment portfolio well positioned to provide you with a healthy retirement?
1. Choose the right structure – Asset protection and tax effectiveness are important for investment growth and wealth protection. Do you invest in own name or in an investment trust or a company? Trusts are crucial for asset protection to shield from potential creditor claims, they provide important estate planning benefits for the family especially for children; and the trust provides additional taxation benefits. Choose the right structure to maximise your after tax income, the annual savings and compounding benefits can be significant over the long term. A discretionary trust is not always the best option; hybrid trusts can be effective for negatively geared properties and depending on the state of purchase, a company or individual might save you more on land tax.
2. Structure your property loans tax effectively – Try to avoid mixing the purpose of your property loan(s) between investment and personal use, maximise deductible debt and minimise non- deductible debt.
3. Maximise available deductions – Minimise potential ATO audit risk by keeping appropriate records including photos of pre and post repairs and renovations. Maximise depreciation by engaging a quantity surveyor. Many investors miss out on significant depreciation claims for capital items such as building costs, fixtures and fittings, kitchen and stoves, air-conditioning and other household capital items. A reminder that the ATO will let you recoup lost depreciation claims for prior years
4. Seek advice from a property consultant - Buyers Agents and Property consultants are well equipped to assist you to find quality properties in high growth locations and can also assist in finding and negotiating clients’ homes in a heated market environment. They can update you on market conditions including top of mind questions such as:
- Is there still a bubble and is it still going to burst? James Freudigmann Director PMC Property says “Property is part of the Australian psyche, everyone wants to own a property and most people if you talk to them at a friends place or a BBQ, are experts. But the markets move at different speeds, have differing dynamics and have a number of other factors that influence popularity and growth. Right now, the Brisbane housing market as one example, is in a significant upswing with demand far outweighing supply and while the market was poised for this growth prior to COVID-19, with the increased interstate migration it has put more pressure on the demand/supply curve. In terms of a bubble, funds are readily available at the lowest rates we have seen in history, supply is low and demand is high, so it is the storm for growth. We don’t believe this is a property bubble, instead this is a condensed growth phase of the property market cycle that may continue for 6-12 months before stabilising slightly to a more sustainable growth phase."
- Rich living in the cities have been buying up property across rural Australia now they can work from home. Is that true? James Freudigmann Director PMC Property says, “The experience of COVID-19 and the flexibility this has brought to a large number of professions has resulted in a significant increase in demand for non-city locations. The strongest demand however has been driven towards the coastlines where people have realised they can have the opportunity for a coastal lifestyle rather than rural inland areas. Areas like the Sunshine Coast, Gold Coast, northern NSW coastal towns have all been in extremely high demand over the past 6-9 months. It will be interesting to see how long these areas continue with the demand and growth phase as a number of companies are now looking to have their teams back in the office for a minimum of a few days per week which may shift the dynamic back towards the capital cities.“