Hi,
I have some saving in my account. And i am paying more tax in the last 2 years due to my salary plus interest earnt
My friend suggested i buy an investment property and borrow as much as i can and do negative gearing.
He said with this method, rather than paying government, you will just get an investment property and pay your investment property instead
May i know other people’s opinion
Thanks
No work = No Tax.
Don't forget to withdrawal all the money from the savings account.
No interest earnt = No Tax!
Better yet donate your money to charity and get a deduction, that's like minus tax!!!!
that's far from true
Also NO PROFIT + NO TAX
The friend has made a ridiculous suggestion.
Buy a loss making investment so you pay no tax?
Seriously?
Thts a great wau to going broke!!!
By all means buy an investment property, but make sure it carries it own weight.
i.e. That the rental earnings cover all your expenses, or close to it.
You never know whan disaster stricks and you are suddenly out of a job!
loss making lol.
@redfox1200: What's lol? That if an asset is negatively geared then by definition it is making a loss?
Flawed comment. Tax loss doesn't equal loss in real terms. Capital allowances and capital works deductions are non cash deductions and probably what forms the biggest part of what makes negative gearing work
be on dole, you life from other's tax money!
I have some saving in my account. And i have been paying too much tax in the last 2 years.
LOL FWP really. The horror of having to pay tax when you make money!
Spend the money then, go on a holiday!
He said with this method, rather than paying government, you will just get an investment property and pay your investment property instead
This means the property costs you more to own than you make from it, all in the hope when you sell it later on the price has gone up.
Wait till you hear about CGT!
Can one deduct the inflation losses from the interest earned?
how is inflation a loss?
You can deduct any expenses and any depreciation on the property (you'd generally get a depreciation schedule for this).
You can't make a $100k loss tomorrow because property values plummet and reflect that on your taxable income. The CGT event is when you sell the house, ie when you sell the increase in value is subject to CGT.
Say you have $1000 in savings at the start of the year. You earn interest at 3%. So you've made $30 in interest, on which you need to pay tax on.
However, if inflation is running at 5%, your $1000 is now actually worth $950, so you've lost $50.
My question is about deducting this as a loss.
@knk: Yeah, it gets complex, as you're also paying tax in the devalued currency.
But from a consistency point of view, if you're paying tax on interest earnings, you should only have to pay on that interest that exceeds the inflation rate.
@RedHab: but if your property investment goes up 10% annually. and inflation is 4%. you still pay CGT on the 10%.
why would bank interest be any different?
Can one deduct the inflation losses from the interest earned?
😂
Definitely not
Move to NZ no capital gains tax
And pay $20 for dozen eggs
If you are paying too much tax you are are entitled to a refund via your tax return.
I think what you really mean is that you are paying more tax than you like.
I like you too
i dont like tax too
Username checks out.
Accountant bud.
Best response
FTFY
Paying too much tax due to on interest earned
( May I say> it's a pure troll question by the way)
Paying tax is a nice problem to have.
Paying tax takes cents, cheers.
Let's make investment decisions based on ozbargain comments slaps forehead
I'd rather consider the opinions of the multitude than a single accountant or tax adviser or financial planner.
Yeah that mob of randoms will certainly have better advice than a qualified professional
that's my experience.
I've picked up some excellent ideas to pursue from randoms on the internet.
Whereas the financial adviser I had an initial consultation with recently tried to tell me that I'm not currently paying any tax on my super in accumulation phase, but I would when I start a pension. If I didn't already know better, it could have been disasterous following any advice I got from that guy.
Qualified counts for little. Recommended is what I'd be looking for. Guess where I'd go for that?
If you are paying “too much” then you need to change accountants…
Or did you mean you are paying any at all as being “too much”.
I think "too much" = "more than before"
OP probs has enough gift card $$$ to pay their own income & tax. Solved
May i know other people’s opinion
Stories which contain “I have a friend who reckons” = the person telling you said story is an idiot
Step 1: Friend who reckons
Step 2: Ask ozbargain
Step 3: Watch youtube/tiktok video
Step 4: Ask ozbargain how to avoid going to prison for tax fraud
I dunno why there are so many people in the world for whom "asking an expert" doesn't seem to be a good idea, but it keeps my popcorn stocks growing.
I reckon it's an excellent use case for a post.
OP has a decision to make, & is seeking others who have been in the same boat. Sure, the outcome might be see an adviser - maybe an adviser will be recommended. But if 100 people all say "my adviser just said pay the tax", OP has just saved himself some $$.
It can't hurt to learn what others have done.
Normally I think obtaining the opinion of others is worthwhile, even on OzB, and dont think using an adviser is needed for 95% of people. However OP is so clearly out of his/her depth that they will have no idea whether any of the suggestions/opinions have any validity.
Another graduate from TikTok University
Tax is what pays for essential services such as schools and hospitals. Thank you for your contribution to making the country a better place.
It’s meant to pay for that, but then our federal government goes and just gives millions of dollars to individuals, or to people overseas instead of spending it here, in Australia, on Australians. This is why so many of our roads, schools, hospitals etc are shit.
Ok Ayn Rand.
Tax is what pays for essential services such as schools and hospitals.
This is very true, however AU$ 1.5B of tax money went to Ukraine too.
Who would have thought! Defending our allies and killing our enemies takes investment! If only everyone could live in peace. We could then stop funding all armies globally :)
Defending our allies and killing our enemies takes investment!
Do you have a list of "our enemies" ?
If only everyone could live in peace. We could then stop funding all armies globally :)
Countries like Iceland does not have an army.
Countries like Singapore or India, still actively invest in weapons productions and land-mines.
So, war is a very profitable business, eg. Telstra going to Iraq to offer to rebuilding their infrastructure.
Military industrialisation is a serious economic undertaking, that is always hidden by the journalists from democracies.
Then, you get situations where your "own allies" are involved in using your passports for nefarious reasons and also caught hacking your own systems too.
Russians aren't my enemies
Do you genuinely think Australians would be better off if Putin could just invade Ukraine, and whatever other countries take his fancy, unopposed?
What do you believe the Australian government's motives for supporting Ukraine are?
Putin could just invade Ukraine
Over last 15 years, the eastern part of Ukraine that Russia went in to "help", were constantly abused and forced to stop speaking Russian language.
Thousands were killed in that region, so I guess Russia probably went in, to help them out, … but calling it 'denazification'.
The negotiations that took place in Turkey, in 2022, were very close to having a peace agreement, but US / UK did not want to stop the war…and forced Ukraine to walk away from negotiation.
What do you believe the Australian government's motives for supporting Ukraine are?
To stay on USA's good side and honour all the treaties, agreements signed between themselves.
A smart boy yawn
well they need schools and hospitals too.
And politicians racking up 3.2 million dollar travel expenses, and the rest
Don't forget $400 billion for submarines that when/if they come on line, they will be sitting ducks for undersea drones.
This I will never understand. Definitely an infinite number of better things to spend $400b on
And plenty of public servants, each of them more vital and deserving than the last.
Yeah public servants are the worst, I hate schools and hospitals and Medicare and the Age Pension. Shut it all down!
Ok boomer, nothing worse than people being advocates for systems in which they are the prime beneficiaries whilst contributing nothing themselves. Be grateful to the working stiffs subsidising you.
@Donmega123: Yep it's true, all public servants are boomers who don't do any work. There is literally nothing worse. They should all be grateful to you and your wisdom!
On a serious note, are you saying hospital administrators are the prime beneficiaries of public hospitals? Are Centrelink staff the prime beneficiaries of having an income support system? Would we all be better off with no delivery of public services?
My friend suggested i buy an investment property and borrow as much as i can and do negative gearing.
I wouldn't say borrow as much money as you can. But you are right, this is very common and what people do, hence why its becoming a big issue in the property market. (Note: I am not an accountant, this isn't financial advice) My points are:
Its not as easy as you think, make sure to talk to an accountant if its actually right for you. Also make sure you are willing to be a proper landlord. This means repairs, fixes, dealing with good and bad tenants etc. People don't understand that investments are a risk and have had it too good for too long in property that they are shocked there are losses you'll have to take too.
You might want to see if you want to add more into your super? That way it takes money out earlier I think?
There might be more options then just property that may work better for you, again see an accountant or similar who can talk you through it.
"My friend suggested i buy an investment property and borrow as much as i can and do negative gearing."
aka I thought I'd troll a bit by pushing readers buttons, because everyone knows NG is a rort that is now the number one cause of high rents and homelessness.
As greedy investors cash in, and the system is forced to house the too many incoming migrants, because 'come in spinner'
+1 for more super contributions as a first step before just borowing and buying!!
Negative gearing is waaay overrated. You're losing money now with the hopes that your property will appreciate enough in future to make it worthwhile, noting you still have to pay tax on any profit you make there.
I ran the numbers personally and found my returns would have been the same as with the stock market (even with leverage it didn't work out) albeit with much less stress.
Again, tax isn't necessarily a bad thing. At minimum though you probably want to make sure you're contributing the maximum you can to super though as that one at least makes sense.
I would guess rental returns, negative gearing, and appreciation would make houses the better bet. Plus it's easier (and cheaper) to borrow money to buy a house vs to invest in the share market.
You should run your figures by us for verification. Something doesn't add up.
I agree with you on negative gearing, but can't see how leveraging didn't blow your figures out of the water.
And the stock market less stressful than property investment??
The share market is only stressful if you watch the shares every day and get stressed about price changes every day. You can invest in a diversified ETF and come back in 10 years time if you want (how most people treat their super - do people get stressed about their super every day?)
Rentals you have tenants, things breaking, constant repairs, updates, complicated accounting and all the rest. You only dont get stressed about prices because equivalent properties dont sell very often; but if the house next door sells for $100k less than you expected, then you can be stressed about it for the next 5 years until another equivalent property sells.
Leverage only works if you are getting a positive return. If you are a property optimist/bull, then by all means.
Can outsource rental management and not watch property prices to avoid the stresses too.
Leverage only works if you are getting a positive return
We're talking about the timeframe @DingoBilly did the maths on. The returns were positive.
Plus ozbargain pimps buy into mutual funds and then cool out smoking the good stuff.
you are assuming that the money reportedlly loss on the property is actually lost
personally, without any evidence, I suspect a significant amount [10-20%] of reported loss were just tax dodging.
It is definitely overrated, the price range that a majority of people would be looking are entry level which are mostly either apartments which generally drop in the long term whilst strata goes through the roof or a house that will never go up in price enough to profit.
People always look at sold history of properties that was bought for X and sold for a "profit" Y and then think if only they bought in but when you actually do the maths after taxes, stamp duty paid, interests paid, strata/council/repairs/agent fees for 5+ years a majority would be lucky to break even.
May i know other people’s opinion
What tax band are you currently in, as there's plenty of easier ways to reduce taxable income than going 'all in' on an investment property. Without that info, and maximising 'easier' tax minimisation options, just YOLO'ing into an investment property seems like a rather poorly thought out strategy.
Eg.Maximise yearly super contributions is one, with (depending on your tax band) can result in a pretty decent ROI (with the * that it's held in super till preservation age)
Draw the money out and out it into a mattress. No more tax on interest.
Instructions unclear. I drew a picture of some money. How do I out and out it into a mattress?
Get the toaster. Remaining steps should be fairly obvious
Burnt toast makes scents. Cheers
Problem is O.P. is not burning through the cash fast enough.
Instructions are quite clear… Now you have to out it into a mattress… so take your drawing of money to your mattress and yell into your mattress that your drawing of money is now gay, thus outing your drawing of money into your mattress…
Yes. That worked better. It was the yelling part that made all the difference. ✅
Please install teamviewer from the link I'll send you and give me access to your PC, so I can get you a full tax refund…
/s
So instead of paying tax on the interest your money makes you'd rather put it into property for the privilege of having to contribute even more money towards it, with the added benefit of dealing with things such as a leaking roof at 2am?
May as well take it all to the casino and put it on black. You'll either double your money or never have to worry about it again.
You forgot about the green 0 and 00, so the odds of doubling his money on black are actually a little under 50%.
I only mentioned the possible outcomes, not the odds of each one occurring.
Damn, you're right.
Paying tax used to be a pride and a good cause. Tax break for the riches has created a scheme that the rich get further ahead while not paying their fair share. Gov should tax more and give it to our frailing health system, police system, transport system.
Gov should stop wasting it on garbage, and put more into the failing health system, police system and education.
At the risk of being unpopular, this reporter places the blame squarely on you!
No disagreement that Australian governments (at all levels) leave a lot to be desired. But we're the ones voting these clowns in.
Sir, we have the choice of a shit sandwich, or a marinated turd.
But we're the ones voting these clowns in.
Not if more and more people, start to put blank ballots in.
No matter who you vote for, the government always gets in.
@whyisave: I can't agree with this. Vote the major parties last and put the incumbent party dead last. They'll get the picture soon enough and it'll be a much bigger concern for the party wonks than a rising informal vote.
@markathome: In China (or Hong Kong), if you stand on the street with a blank piece of paper, you get arrested.
Blank paper is like a blank ballot.
It sends a strong signal, in the a preferential voting system, where backroom deals are not known to the public, before they vote anyway, and the votes still end up for people you did not vote for.
I got what you mean, by using the preferential voting system "against itself" by choosing major parties 'last' and the incumbent 'even more last', but until there's a multi-party system,…it's still a 2-party way of looking at decision-making, because lobby groups don't like to lobby many groups, when they can only use 1 group to lobby against another.
No matter who you vote for, the government always gets in.
@whyisave: How is a blank ballot going to have any impact - do you have a source suggesting numbers of informal/donkey ballots are counted and considered?
We are talking about Australia, not China (or Hong Kong)
How is a blank ballot going to have any impact
It has an impact, when the masses get sick of the system and will do it.
I'm not sure of this data, but with growing voting population, is also a growing number of informal / donkey votes,
but people don't equate this to dissatisfaction and just say it's proportional to the previous election years.
I was giving the Chinese example, because a blank piece of paper is so powerful, that if this was tried here, it could have the same impact, if enough people did it.
Not really we're presented with vetted options by the parties it's not much of a choice. Kind of like an arranged marriage where we are raped if we take too long to fall in love.
Work less, then you can pay less tax