I am wanting to buy an apartment for investment purposes and want to know the most tax efficient way to do so.
From a tax perspective, it is ideal to invest in the market under R1m. This is because your transfer duty at this end of the market is substantially lower, and as the purchase price increases, so too do the costs.
It also means that when an investor chooses to sell his apartment, the capital gains tax shouldn't be exorbitant because of the price band.
When investing, the type of vehicle used to purchase the property impacts upon the tax.
Residential properties are exempt from capital gains tax (CGT) for the first R2m gain, provided that these are primary residences.
Once you enter the investment market, this exemption falls away and the decision is simply whether to purchase in a company, trust or individual name.
Acquisition costs are the same for all legal entities, but CGT is highest on trusts, followed by companies and then private individuals. For private individuals, the effective rate is about 13% of the gain, for companies, it is about 18% of the gain and for trusts it is about 26% of the gain.
With regard to the actual management of the investment and its rental returns and tax implications, the ideal scenario is to gear the property in such a way that the rent almost covers the bond instalments, but there is still a small monthly "tax loss".
Therefore, one should aim to put down a 50% deposit and acquire a 50% bond, as returns are generally equivalent to 0.5% of the purchase price. Therefore, on a R1m apartment, you can expect a rental of R5 000.
Your bond repayments will be around R5 000 per month and then your levies and rates will add to the monthly costs, leaving your property running at a small tax loss.
Elite Wealth Creators have been involved in the property and finance industry for over 20 years. Our Investment Property Strategists deliver investment grade properties to the investment market and mediate between the developer and the investor. We also assist first home buyers in purchasing their first home in QLD through our house and land packages – this includes receiving $20,000 cash back towards their mortgage by buying one of our full turn-key packages.
Our service will take you through the complete process of buying positive cash flow property, including:
• educating you on positive cash flow and the ability to pay your mortgage off years in advance
• saving you thousands of dollars in interest
• supporting you in the decision on which property to buy
• assisting in the organizing of your finances, if required
• preparing you for settlement of contracts
• liaising with other professional advisers on your behalf if required.
Our Strategists specialise in delivering quality positive cash flow property and also helping investors pay off their mortgage years in advance
http://www.
sales@elitewealthcreators.com
1800 GO ELITE
From a tax perspective, it is ideal to invest in the market under R1m. This is because your transfer duty at this end of the market is substantially lower, and as the purchase price increases, so too do the costs.
It also means that when an investor chooses to sell his apartment, the capital gains tax shouldn't be exorbitant because of the price band.
When investing, the type of vehicle used to purchase the property impacts upon the tax.
Residential properties are exempt from capital gains tax (CGT) for the first R2m gain, provided that these are primary residences.
Once you enter the investment market, this exemption falls away and the decision is simply whether to purchase in a company, trust or individual name.
Acquisition costs are the same for all legal entities, but CGT is highest on trusts, followed by companies and then private individuals. For private individuals, the effective rate is about 13% of the gain, for companies, it is about 18% of the gain and for trusts it is about 26% of the gain.
With regard to the actual management of the investment and its rental returns and tax implications, the ideal scenario is to gear the property in such a way that the rent almost covers the bond instalments, but there is still a small monthly "tax loss".
Therefore, one should aim to put down a 50% deposit and acquire a 50% bond, as returns are generally equivalent to 0.5% of the purchase price. Therefore, on a R1m apartment, you can expect a rental of R5 000.
Your bond repayments will be around R5 000 per month and then your levies and rates will add to the monthly costs, leaving your property running at a small tax loss.
Elite Wealth Creators have been involved in the property and finance industry for over 20 years. Our Investment Property Strategists deliver investment grade properties to the investment market and mediate between the developer and the investor. We also assist first home buyers in purchasing their first home in QLD through our house and land packages – this includes receiving $20,000 cash back towards their mortgage by buying one of our full turn-key packages.
Our service will take you through the complete process of buying positive cash flow property, including:
• educating you on positive cash flow and the ability to pay your mortgage off years in advance
• saving you thousands of dollars in interest
• supporting you in the decision on which property to buy
• assisting in the organizing of your finances, if required
• preparing you for settlement of contracts
• liaising with other professional advisers on your behalf if required.
Our Strategists specialise in delivering quality positive cash flow property and also helping investors pay off their mortgage years in advance
http://www.
sales@elitewealthcreators.com
1800 GO ELITE
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