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Purchase of Property. Assume:-$100,000 In SuperProperty:-2 Bedroom Apartments - New $80,000 Salary$290,000 Average Price Age 40$330 Per Week Rental $400 Strata Levies Per Quarter Total Purchase Price Including Stamp Duty$300,000 Deposit Ex Super Fund$100,000 - PowerPoint PPT Presentation
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Purchase of PropertyPurchase of Property
Assume:-Assume:- $100,000 In Super$100,000 In Super Property:-Property:- 2 Bedroom 2 Bedroom Apartments - NewApartments - New
$80,000 Salary$80,000 Salary $290,000 Average Price$290,000 Average PriceAge 40Age 40 $330 Per Week Rental$330 Per Week Rental
$400 Strata Levies Per $400 Strata Levies Per QuarterQuarter
Total Purchase Price Including Stamp DutyTotal Purchase Price Including Stamp Duty $300,000$300,000
Deposit Ex Super FundDeposit Ex Super Fund $100,000$100,000
Non-Recourse Loan (70% L.V.R.)Non-Recourse Loan (70% L.V.R.) $200,000$200,000
Holding Period Holding Period (Reflected in Super Fund)(Reflected in Super Fund)
Rental Income ($330 x 52 wks)Rental Income ($330 x 52 wks) 17,00017,000
Costs & DeductionsCosts & Deductions
Interest ($200,000 x 6%)Interest ($200,000 x 6%) 12,00012,000Strata, Council, Water, etc.Strata, Council, Water, etc. 2,0002,000Depreciation, Building Allowance,Depreciation, Building Allowance, etc (Non-Cash)etc (Non-Cash) 9,000 9,000 23,00023,000
Negative Gearing AmountNegative Gearing Amount $( 6,000) $( 6,000)
Contributions To Superannuation Contributions To Superannuation FundFund
9% Levy x $80,000 = $7,0009% Levy x $80,000 = $7,000(Optional to S.M.S.F. or Industry Fund)(Optional to S.M.S.F. or Industry Fund)
Assume elected to industry fund, therefore a future buffer for cash flow anomalies that may arise.Assume elected to industry fund, therefore a future buffer for cash flow anomalies that may arise.
Salary or Profit Sacrifice – Say to Match Gearing LossSalary or Profit Sacrifice – Say to Match Gearing Loss
AmountAmount 6,000 6,000Negative Gearing LossNegative Gearing Loss (6,000) (6,000)
NIL NIL - No Contribution Tax- No Contribution Tax
Salary Tax Savings $6,000 x 40% - Say $2,500Salary Tax Savings $6,000 x 40% - Say $2,500
Cash Surplus in Fund – Non-Cash deductions i.e. $9,000 (Cash Surplus $3,000 + Contribution Cash Surplus in Fund – Non-Cash deductions i.e. $9,000 (Cash Surplus $3,000 + Contribution $6,000) $6,000)
(Can be used to pay down principal loan)(Can be used to pay down principal loan)
Therefore:-Therefore:-
A tax deduction is achieved for the principal reduction of the bank loanA tax deduction is achieved for the principal reduction of the bank loan
Sale of PropertySale of Property(Reflected in Superannuation (Reflected in Superannuation Fund)Fund)
Sale PriceSale Price 350,000350,000
CostCost 300,000300,000
Capital GainCapital Gain $50,000$50,000
Taxed at 10%Taxed at 10%
Depending on Age and Position of Fund, May be Nil TaxDepending on Age and Position of Fund, May be Nil Tax
Therefore:-Therefore:-
The process delivers a property that actually costs 2/3 of the purchase price The process delivers a property that actually costs 2/3 of the purchase price purely on the differential in the tax rates of the entities used in the process.purely on the differential in the tax rates of the entities used in the process.
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