Comments on: Interest rates and crystal balls

By: scott

scott — Tue, 01 Apr 2008 09:25:14 +0000

I thought the legislation said that you can only have one principle place of residence (PPR) at any time and that this residence is exempt from CGT. This would mean that if you were taking a long holiday, working overseas etc then you would not have any PPR in Australia so you could apply your PPR CGT exemption to the property you used to live in but have now moved out of. I didn’t think it applied in the situation were you move out of your house and start renting another one (as now the place you are renting would be your PPR).

In any case it is clear that you can only claim CGT relief on one property at any time . So if you move out and rent out your property – you must also rent – you cannot also own the new property you move into.

Also, be careful with the “benefits” of depreciation deductions. If you claim $50k of depreciation on a $500k property, your cost base for CGT purposes will be $450k ($500k-$50k) – ie you are really just getting a timing advantage by saving tax now but paying more tax when you sell (albeit with 50% reduction if you hold it for >12 months).

Like others – I’m not an accountant so check it out for yourself..

By: Greg Vincent

Greg Vincent — Mon, 31 Mar 2008 06:57:03 +0000

Nick, don’t sack the accountant just yet, I found out that it might not be quite as easy as it sounds. The real grey area to this loophole is the part where they have identified the reasons for moving as shown in the following link.
http://www.ato.gov.au/corporate/content.asp?doc=/content/86191.htm

Not sure how long it’s been around for but I’m pretty sure it’s been available for quite a few years.

By: snoop

snoop — Sun, 30 Mar 2008 21:30:34 +0000

Re the fixed 30 year mtge…wldnt it be great
Its greed Dave from our local banks and of course the banks in the US have Fannie and Freddie to back them up.

By: Nick

Nick — Sat, 29 Mar 2008 11:38:47 +0000

WTF?! Remind me to fire my accountant. Liem, do you know, is that new legislation?

By: Glenn Batten

Glenn Batten — Fri, 28 Mar 2008 06:00:21 +0000

We had a very quiet week after the announcement but as soon as the market commentators all started to agree that the interest rate hikes appear to be at an end the market took off full steam ahead again. In fact the last 3 weeks have been that good our month will still be higher than normal.

How has the last few weeks been elsewhere around the country?

By: Liem Nguyen

Liem Nguyen — Thu, 27 Mar 2008 03:36:22 +0000

Hi Glen,

Your are correct on the CGT exemption however the current time period is 6yrs. This means if you rent it out for less than 6yrs and move back in for a certain period (generally more 3months) and then rent it out again for another cycle of 6 yrs and will be be CGT exempted. The information is on the ATO website.

Having said that, most of my Sydney properties in the western suburbs have gone backwards so CGT is not current concern? haha

Liem

By: Nick

Nick — Wed, 12 Mar 2008 01:56:44 +0000

Just guessing Dave… but perhaps it’s our smaller economy and floating dollar? Banks don’t have enough money to cover domestic loans without having to offset this against their own borrowings in international wholesale money markets, which are subject to dollar fluctuations over time?

By: daytona beach fl remax

daytona beach fl remax — Mon, 10 Mar 2008 12:55:28 +0000

I believe they will cut them one more time this month and then they will begin to rise and by 2009 we will look back at early 2008 as the best interest rates in years and best priced homes on the market.

By: Dave Platter

Dave Platter — Sat, 08 Mar 2008 02:46:49 +0000

This is probably a stupid question, but as a relatively new-to-Australian, let me ask it anyway. Does anyone know what it is about the financial markets in Australia that prevent banks from offering 30-year mortgages in which the rate is fixed for the entire lifetime of the loan?

That’s a very popular product in the US because it gives homebuyers a bit of certainty. No matter what rates do during the next 30 years, they know exactly what their mortgage payment will be.

Thanks for any illumination any one can provide.

By: Greg Vincent

Greg Vincent — Wed, 05 Mar 2008 23:02:50 +0000

Nick, I agree CGT was unlikely to apply for a while.
The other thought is that over in Japan they had to generate 100 year home loans (3rd generation loans) because the house prices were so expensive.
If the banks offered a longer term but had to get back to a 30% of gross wage scenario I wonder if that would help. By holding the percentage at 30% it would restrict the idea of increasing the borrowing capacity & igniting an unsustainable boom.
Or perhaps they could offer an interest only option on mortgages for a period of 2-3 years to allow people to get back on their feet – Bad debts aren’t good for the economy – banks or mortgage insurances companies included.
If they could re-structure products it might help hold it all together.