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Catherines Chat

Wholistic Financial Solutions provides a lot of essential information and updates regarding the property investment industry. Check this page for the updates.

Property Clock is Ticking

Wednesday, March 02, 2016

Herron Todd White's Property clock noting Toowoomba, Canberra, Brisbane and Sunshine Coast as rising markets. good picks in my opinion too


 

 

 

Happy Client Testimonial

Tuesday, February 16, 2016

Catherine

Thank you for sending the additional information on property hot spots.  It was a very interesting read (as well as a good quality product) and I think very worthwhile.

I also want to thank you for your time – the Pathway to Wealth session was very useful from a practical sense but also, in terms of giving me a sense of control, confidence and certainty over my short and long term financial futures.

I would also like to commend Lara and Lynda for their professionalism and courtesy

Regards

Ray

WFS In the News

Wednesday, February 03, 2016

Catherine Smith from Wholistic Financial Solutions comments on the Canberra Property Market


https://www.mywealth.commbank.com.au/property/canberra-suburbs-to-watch--infocus201601


What to Bring to Your Tax Appointment

Monday, July 08, 2013

Hi all and welcome to the first tax related post for the new financial year.

This time of year we have a lot of people asking us what to bring along to appointments for their tax returns (or email through depending on preference).

Please find below a list of information that we believe should cover most bases when trying to get your documents together.
Please remember though, when in doubt just include it.

Also in this listing are links to our individual schedules and rental property worksheets.

To efficiently provide you with the best service it is beneficial for you to bring the following to your appointment:
o Bank account details (for payment of refunds)

o Previous year’s tax return (if a new WFS client)

o Previous years invoices relating to cost of managing tax affairs (if a new WFS Client)

o Details of interest received.

o Details of dividends received

o All Payment Summaries/Group certificates for the year

o Receipts for (or preferably a summary of) all work related expenses (i.e. union fees)

o Any work related car expenses

o Any work related travel

o Any work related uniform or clothing expenses

o Any work related self-education expenses

o Summary of donations

o    Sale price and Cost base of assets (if disposed of in 2013)

o    Spouse income (if not a WFS client)

o    Summary of child support paid

o Private health fund statement

o Details of medical expenses, if net out of pocket costs exceed $2,120.00
If you intend to claim  please bring:

                o Private health  insurance  summary (of claims, not certificate of cover)

                o Summary of other out of pocket medical expense or receipts for any other medical expenses (not claimed through medicare or private health insurance)

o Any other items that you feel are relevant.

 

For rental properties:
o Please click here to download our rental property worksheet (1 sheet per property, per year)
              The worksheet is optional, but does entitle you to a 15% discount  if completed correctly.

o Details of all rent received – (rental property management annual summary preferred)

o Details of all expenses including interest

o  Property address and date first earned rental income (if first year with rental property)

o Depreciation report (or list of all capital  expenses)

o Any other items that you feel are relevant.

 

If you wish to email through your information, please use our individual schedule. You can download it here.

Queensland Property Growth

Friday, March 22, 2013
Hi all,
Only two weeks till I go on an extensive filed trip around QLD looking for the best property investments.  One has caught my attention as an example;
Everton Park – eight kilometers north of the Brisbane CBD - experienced the highest median price growth in 2012 for units and townhouses, according to the latest Real Estate Institute of Queensland (REIQ) data.

The median unit and townhouse price for Everton Park for the 12 months up until December is $430,000 – a 22.9% increase on the median price of $349,813 in 2011.

 

However suggesting some volatility in the suburb, it experienced a December quarterly fall of 16.1% to $390,000.

Sherwood – 9 kilometres south west of the CBD - comes in second place, experiencing an 18.0% annual growth from $372,500 to $439,500.

 

Chermside was the weakest performing suburb in the Brisbane city, falling 15.8% annually from $431,000 in December 2011 to $363,000 in December 2012.

Region

Median sale 12 months December 2012

Median Sale 12 months December 2011

One year change

Everton Park

$430,000

$349,813

22.9%

Sherwood

$439,500

$372,500

18.0%

Stafford

$407,500

$360,000

13.2%

St Lucia

$479,000

$425,000

12.7%

Hamilton

$477,500

$427,500

11.7%

Taringa

$434,000

$390,000

11.3%

Teneriffe

$555,938

$512,500

8.5%

West End

$523,000

$483,550

8.2%

Balmoral

$465,000

$431,500

7.8%

Bulimba

$549,500

$510,000

7.7%



Stay tuned for a more comprehensive report when I return from my trip with actual visual context and research backed up by local knowledge

Negative gearing for property investors makes good economic sense: Cameron Kusher

Friday, December 28, 2012
n its most simplistic form, negative gearing for investment housing allows investors to deduct their losses against their personal taxable income.  These losses may occur when the investor incurs costs such as interest on a home loan as well as maintenance and other small expenses on an investment property. However, it is important to note that negative gearing is not unique to the property asset class; it also applies to businesses and shares in Australia.

The most important thing to realise about asset negative gearing is that it is fundamentally offsetting a loss.  Although you can claim that loss on your tax return, the investor must carry the cost of that loss throughout the year.  Ultimately, when investing, most purchasers would be hoping that rental rates increase over time and result in the asset moving from a loss-making one to an income-producing one.

It is also important to note that between September 1985 and September 1987, negative gearing laws were changed.  The government quarantined negative gearing interest expenses on new transactions.  As a result, investors could only claim interest expenses against rental income, not other income.

Given that negative gearing provides a benefit to investors, we look at the impact these changes had on the investment market over the two-year period.  The first component is the impact the changes had on the rental market.

According to the rental component of CPI data, rents across the capital cities rose by 21.8% over the two years to September 1987 (the period during which negative gearing laws were changed).  The increase in rents was most pronounced over the period in Sydney (26.1%) and Perth (31.1%).  As a comparison, over the two years to September 1985, rental costs rose by a lower 17%.

Click to enlarge

The data clearly shows that rental growth was present over this period and it was greater than it was over the two-year period directly preceding it (The above chart shows the period for which the negative gearing rules were changed and are bolded black).  Here you can see that rental growth was well above average, particularly recent averages, but it was not unprecedented, with rents growing by a greater amount on an annual basis in late 1982 and early 1983.

Another important determining factor is the demand from investors over this period.  Unfortunately the Australian Bureau of Statistics does not provide information on the number of loans to investors; rather it provides the total value.  The total value of investment finance commitments in September 1987 was 41.5% higher than in September 1985.  These figures seem to suggest that at that time there was no weakness in demand for investment housing, however, a clearer outcome would be apparent based on the number of loans rather than the value.

The reason why negative gearing was reinstated in September 1987 was that it was proclaimed that rents rose sharply on the back of a fall in housing market investment.  However, it doesn’t look as if investment in the housing market dried up throughout this period. Rents clearly did rise quite sharply throughout, as demonstrated.

 

Many in favour of removing negative gearing from property say that it should occur due to the fact that housing is an unproductive asset class.

My argument is that given that housing provides shelter, if investors don’t purchase these assets, it would then be the responsibility of the government to provide this shelter.  Ultimately, that would mean that anyone that pays taxes would be funding housing for those who can’t afford it themselves.

One of the arguments against negative gearing is that the tax deductions afforded to investors in the housing market reduces government revenue.  However, if investors did not provide shelter to those who can’t provide it to themselves, government revenue would already be reduced due to the fact that this responsibility would fall on the government.

If we look at the recent Australian Bureau of Statistics (ABS) dwelling approvals data, it is interesting to see just how much of the new housing supply is created by the private sector as opposed to the public (government) sector.  According to the ABS dwelling approvals series, which began in July 1983, between July 1983 and October 2012, 4,355,266 dwelling approvals have been given to the private sector compared to just 228,843 to the public sector.  Over the last 29 years (give or take a few months), public housing approvals have accounted for just 5% of all dwelling approvals.  This is less than 8,000 approvals by the public sector each year!

Over the 12 months to October 2012, 145,515 dwellings approvals were granted to the private sector (98.6%) compared with just 2,065 to the public sector (1.4%).

The most recent census data shows us that of those homes occupied, 29.6% are rented (investment properties).  Based on this data, if we assume that without the private sector building homes for investment purposes, the public sector would have to account for 29.6% of all dwelling approvals to cover those in rental accommodation.  Over the past 12 months this would have equated to 43,684 dwelling approvals.  If we also consider that the median home price across Australia as at October 2012 was $386,000, and if the government had to buy the land and build 43,684 homes, this would cost the Government of the day $16,861,900,480 based on the number of approvals and the median home price.

Of course this is a rather simplistic calculation and if the government were to build homes on its own land it would cost less, as that figure includes land and building.  Also, it is unlikely that private investment in residential housing would cease without negative gearing but I would expect that it would fall.

The most recent taxation statistics data shows that over the 2009-10 financial year, $4.81 billion in net rental deductions were claimed by taxpayers.

rpdec172

In order for the government to break even to allowable deductibles from tax returns they would have to be building those 43,684 homes at a cost of $110,100.  Based on the current median home price across the country at $386,000, they would have only been able to build 12,461 homes over the past 12 months or 8.4% of the total building approvals over the past year.  It should be noted that not all new builds are for investment purposes but if we assume that 29.6% are there is a significant shortfall.

When you look at these figures it is obvious why negative gearing is unlikely to be removed.  Whether the removal of negative gearing impacted investment or not, and whether it lead to an increase in rents is a secondary concern relative to how much it would cost the government to supply public housing for the almost 30% of Australians that don’t own their own home.

These figures are not to suggest that if in the case negative gearing was removed, there would be no investors in the market however, the appeal of negative gearing is part of what attracts many investors to the market.  Without negative gearing it is likely that there would be fewer investors and therefore less private developers delivering new homes coupled with a greater need for the public sector to provide housing.  The flow on effect may also be that there would likely be lower demand for housing credit.  Although some proclaim removing negative gearing would cause house prices to fall, I would expect that new housing supply would be even tighter as developer’s struggle to achieve pre-sales for new development, this may in-turn force prices higher than they otherwise would be.

By looking into the figures in more detail, it makes good economic sense for the government to allow housing investors to negatively gear their properties so that the significantly greater cost of providing social housing is not borne by the Government and ultimately the Australian taxpayer.

Cameron Kusher is senior research analyst at RP Data.

 

ATO concerns over SMSF investing in Property over stated

Friday, December 28, 2012

The Australian Taxation Office (ATO) recently released a Taxpayer Alert (TA 2012/7) which outlines the ATO’s concerns that some arrangements entered into by an SMSF to acquire property do not comply with the law.

The ATO is concerned that it may not be possible to simply restructure or rectify the arrangements, and unwinding the entire arrangement could lead to a forced sale of the asset, potentially at a substantial loss to the fund.

The ATO is concerned about the potential consequences of poorly structured arrangements regarding direct property investments using limited recourse borrowing arrangement

Under a limited recourse borrowing arrangement (LRBA), the SMSF borrows money to acquire a property which is held via a holding trust (the Bare Trust). The rights of the lender in the event of default of the loan are limited to the asset over which the borrowing is held.

 

Issues of concern:

  • Where the borrowing and the title of the property is held in the individuals' name and not in the name of the trustee of the holding trust. The SMSF pays part or all of the initial deposit and the ongoing loan repayments.
  • The title of the property is held by the SMSF trustee not the trustee of the holding trust.
  • Where the trustee of the holding trust is not in existence and the holding trust is not established at the time the contract to acquire the asset is signed.
  • The SMSF trustee acquires a residential property from an SMSF member.
  • The asset is a vacant block of land. The SMSF trustee intends to use the same borrowing to construct a house on the land. The land is transferred to the holding trust prior to the house being built.

Superannuation issues that could arise from such arrangements

  • The arrangement may be in breach of the sole purpose test (SISA section 62).
  • The arrangement may be in breach of the borrowing provisions (SISA section 67).
  • The asset acquired is not a single acquirable asset (SISA section 67A(2)).
  • The asset is subject to a charge in breach of the borrowing provisions (SISA section 67A(1)(f)).

Summary

In my opinion all of the above issues can be overcome by Trustees of the SMSF obtaining advice from qualified and experienced SMSF administrators.  WFS Canberra Pty Ltd is able to offer such advice as well as set up the Bare Trust and obtain the loan to acquire the property. As long as all the correct legal steps are undertaken, in the correct order SMSF trustees have nothing to be concerned about.

 

Flood of activity' still coming in QLD

Wednesday, December 05, 2012

MORE than 13,000 machine operators, 6000 graduates and more than 7000 tradies will be needed by 2015 to keep Queensland's mining industry ticking over.

Skills researcher Kinetic Group's boss Derek Hunter concedes these are "uncertain times", but said a flood of activity was still headed our way.

"If you stop looking at the headlines and look at what the activity in the industry is right now, it's as high if not higher than it has ever been," Mr Hunter said.

"We have got significant new growth in productivity from 2013 onwards."

As of April, there were 20 mining and gas projects in Queensland alone, amounting to more than $64 billion in investment.

That includes BHP Billiton's Caval Ridge and Daunia mines already under construction which will deliver a total of 2450 jobs in construction and during operations

"These are not pie in the sky figures - the companies already invested are unlikely to stop them going through to production unless there was the most amazing crash."

He noted that even the global financial crisis, though it created a few "blips" for the industry, had only mild long-term effects.

Mr Hunter said the danger was this boom to bust mentality, if something stopped booming, then surely it had bust.

"We have to change people's heads about that - companies have shareholders to satisfy so action must be taken as soon as there is difficulty.

"Certainly (BHP Billiton Mitsubishi Alliance) is laying people off, they have closed a couple of mines in the past few months.

"But they have absorbed most of them back into the organisation."

Mackay's Northern Beaches booming

Wednesday, December 05, 2012

IT'S still a wise move to invest in Mackay's housing market and the Northern Beaches will be a buyers' hot spot.

This is the opinion of Xcel Properties managing director developer Kim Clarke.

Xcel Properties released more house and land packages to market at its popular master-planned estate Plantation Palms recently.

"The city is struggling to keep up with its growing population - 1500 new homes needed to fill the demand every year," Mr Clarke said.

"With all the uncertainty the market did slow down for a couple of weeks, but that was Australia-wide.

"In the last few weeks we have seen it pick up again, particularly in Mackay."

Despite a drop in consumer confidence, Mackay was still a worthy choice for investment, Mr Clarke said.

"I think one of the things that impressed in the most about the Mackay city, is its strong economy.

"It has strong agriculture, strong manufacturing in Paget, and then the businesses that are servicing the surrounding mines."

Northern Beaches is one of the fastest-growing areas in Mackay and Mr Clarke said that was about to ramp up as major projects came online.

"There is the new school, it's close to the shops and eventually there will be bus routes and cycle ways that link up to the shops and beaches," he said.

"People living in Plantation Palms will be able to walk, or cycle if they prefer, to school and to the shops."

Mr Clarke said the area was unique because the majority of the land was bought off a sole owner.

"The Symons family owned the whole area years ago... we are able to work with the Mackay Regional Council to think about the planning of the estate and the area."

The new packages are part of the Stage 3B and comprise 46 lots from 535 to 881sq m. They are priced between $199,000 and $285,000.

Mr Clarke said the range of people looking to buy the packages was broad, but he noticed a strong trend in buying smaller lot sizes.

"There seems to be a lot of older couples who are looking to downsize," he said.

"But the first-home buyers, which are generally your young married couples, are looking that to go that way as well.

"First-home buyers usually want to invest between $380,000-$440,000 mark.

"But in saying that, there will always be people wanting to buy the bigger blocks with the larger manor homes as well."

What's available?

 Stage 3B comprises 46 lots from 535 to 881sqm,

  Prices range between $199,000 and 285,000

Thousands needed to run mines

Wednesday, December 05, 2012

MORE than 13,000 machine operators, 6000 graduates and more than 7000 tradies will be needed by 2015 to keep Queensland's mining industry ticking over.

Skills researcher Kinetic Group's boss Derek Hunter concedes these are "uncertain times" but said a flood of activity was still headed our way.

"If you stop looking at the headlines and look at what the activity in the industry is right now, it's as high if not higher than it has ever been," Mr Hunter said.

"We have got significant new growth in productivity from 2013 onwards."

As of April, there were 20 mining and gas projects in Queensland alone, amounting to more than $64 billion in investment.

That includes BHP Billiton's Caval Ridge and Daunia mines already under construction, which will deliver a total of 2450 jobs in construction and during operations.

"These are not pie in the sky figures - the companies already invested are unlikely to stop them going through to production unless there was the most amazing crash," Mr Hunter said.

He noted that even the global financial crisis, though it created a few "blips" for the industry, had only mild long-term effects.

Mr Hunter said the danger was this boom to bust mentality, if something stopped booming, then surely it had bust.

"We have to change people's heads about that - companies have shareholders to satisfy so action must be taken as soon as there is difficulty.

"Certainly (BHP Billiton Mitsubishi Alliance) is laying people off, they have closed a couple of mines in the past few months.

"But they have absorbed most of them back into the organisation."

Daunia

  • Open cut mine, 2960 hectares
  • Production expected to begin next year
  • Full production of 4.5 million tonnes per annum expected in 2014
  • 1000 employees required in construction phase, 450 during production
  • Caval Ridge
  • Open cut mine, 6706 hectares
  • Production expected to begin in 2014
  • Full production of 5.5 million tonnes per annum expected
  • 2000 employees required during construction, 500 during production

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