Spring Clean Your Life Planning

Spring has sprung, the days are getting longer and the sun is getting warmer – if you haven’t already, you are likely getting out in the garden, cleaning the house, and planning your summer projects around your home and garden.

In all the excitement of improving your physical environment, spare a thought for your life planning; that is, your future estate, asset and tax planning – it is a great time of year to give these a freshen up too!

Your Will is an easy place to start.  We recommend that a review of your existing Wills should be undertaken every 5 years, or earlier, if your current circumstances change.  If you don’t have a Will, NOW is the perfect time to get that process started.

Aside from regular reviews, there are certain milestones which are ideal point to consider and update your Will.  If any of the following have occurred in the last 12 months, or are likely to occur in the next 12 months, a review is necessary:

  • ENTERING A NEW RELATIONSHIP
  • MARRIAGE
  • CHILDREN
  • PURCHASING OR SELLING PROPERTY
  • CHILDREN BECOMING ADULTS
  • RETIREMENT
  • ESTABLISHING A BUSINESS
  • BUSINESS OR TRUST CHANGES
  • RELATIONSHIP BREAKDOWN, SUCH AS SEPARATION OR DIVORCE

If any of the above scenarios have recently changed in your life, it would be a good idea to grab copies of your signed Will, have a sit down and read over what you have in place.  If you see anything which requires change, or you are unsure about the impact of a life event, come see our legal team and we will assist you with the review.

Another issue worth noting is how marriage, separation and divorce can affect your Will if you fail to update it.  Each has a different consequence, and failing to consider and update your Will and Powers of Attorney at the time can result in the wrong people being in control of, and entitled to, your hard-earned assets.

The key to good long-term life planning is to be prepared, and obtain advice before committing to a significant life, asset or business change [where possible].  This isn’t limited to Wills, as changes can also impact Powers of Attorney, ownership of assets [ie. if owned jointly with others], business structures and agreements and superannuation entitlements.

Contact our Legal Team today to get your Life Planning spring clean underway.

 

Kayla Kennedy – Solicitor

LLB

Investment Properties – What Happens When You Sell?

Investment Properties – What happens when you sell?

When you sell an investment property, you are likely to make a capital gain or profit and will be required to pay tax on it.  The tax consequences depend on a range of issues, from whether you inherited or purchased the property, to your intention for the property if it was a new build.

In certain circumstances, an inherited property can be tax free when it is sold, but this is dependent on who you inherited the property from, how they used the property before you and when you sold it.  Was it an investment property for them or a principal place of residence?  The answers to these questions will have a bearing on whether there is no taxable capital gain or whether you will end up with a large amount of tax to pay.

Your intention for an investment property can make a difference on whether the ATO will consider it to be subject to capital gains tax or if it should be considered a profit-making venture, especially if you are building on vacant land.  Your intention should be made clear from the outset and documented to avoid complications further down the track.  If your intention is to build a property and keep it for a number of years and rent it, this leans more to the fact that it should be treated as a capital gain.  If you have to sell earlier than you had wished for, the ATO could view it as being a profit-making venture, depending on the time frame between the build being complete and the sale.  This is where documenting your intention can become important.  Where you buy vacant land, or land with a house and demolish it, then proceed to build units on the land, the ATO will consider this a profit-making venture.  In this circumstance, you are likely to be required to register for GST as well.

There are many considerations that need to be taken into account when selling an investment property and it is not always a simple process to determine the tax consequences.

 

Danny Grigg – Senior Accountant

B.Comm CA

Advantages + Disadvantages of Investment Properties

Advantages + Disadvantages of Investment Properties

Purchasing an investment property can be a very exciting time and can help build your wealth over time.  However, before rushing out to buy an investment property, it is important you consider the pros and cons.

ADVANTAGES

  • Provision of rental income to help top of other income
  • Help reduce income tax if the property is negatively geared i.e. the rental income is less than the interest on the loan
  • Potential capital growth in value of the property
  • Can be less volatile than shares or other investment options

DISADVANTAGES

  • Lack of investment diversification
  • A lot of money is tied up in one asset that can take time to sell
  • Buying and selling costs can be high
  • Tenancy risk. There is a chance your investment property will have periods of time where it is not tenanted.
  • You are responsible for all ongoing maintenance
  • Capital gains tax will be payable if the property is sold at a profit
  • Interest rate risk – a rise in rates will result in higher loan repayments and a potential reduction in net income
  • A substantial amount of capital is required from the outset

As always, we encourage you to seek professional advice to ensure the decision is right for you.

 

Samantha Butcher – Financial Adviser

BComs Dip FS