Tax change. Interest can no longer be offset. Who's effected and how?

[McDuck]

Tax change.

(Unconfirmed rumor).

Interest can no longer be offset against income from your day job.

Who's affected and how?

Short term cashflow ok.. rent still comes in.

Long term asset accumulation ok ...Capital gain still happens.

Who's on the line, and by how much ?

[richard56]

Hi
The way i understand it.....

My Interest bill is $25000 per annum
My Rental Income is $25000 per annum
$25000 interest - $25000 income = no tax to pay.

Now
My Interest bill is $25000 per annum cant be claimed anymore.
My Rental Income is $25000 per annum
$25000 income = $3400 tax to pay roughly

So I am out of pocket $65 per week.

Who is effected ?
My tenant....if I try to get back to where I was yesterday...their rent goes up $65 per week.

or

Me....my income in my retirement has gone down $65 per week if I dont increase rent.

Richard

[Frezzinghot]

Tax change.

(Unconfirmed rumor).

Interest can no longer be offset against income from your day job.

Who's effected and how?

Short term cashflow ok.. rent still comes in.

Long term asset accumulation ok ...Capital gain still happens.

Who's on the line, and by how much ?

Nothing to me, cashflow is strong and by the looks of things is about to get better!

And the best time to sell property is when you go to the grave. (So never)

nothing to see here, move along, move along.

Getting into the investment market might be another story now.

[Frezzinghot]

Hi
The way i understand it.....

My Interest bill is $25000 per annum
My Rental Income is $25000 per annum
$25000 interest - $25000 income = no tax to pay.

Now
My Interest bill is $25000 per annum cant be claimed anymore.
My Rental Income is $25000 per annum
$25000 income = $3400 tax to pay roughly

So I am out of pocket $65 per week.

Who is effected ?
My tenant....if I try to get back to where I was yesterday...their rent goes up $65 per week.

or

Me....my income in my retirement has gone down $65 per week if I dont increase rent.

Richard

Rent hike! Rent hike! Rent hike!

[Jeffa]

If you acquired a property before 27 March 2021, you can still claim interest (for loans that already existed for that property) as an expense against your residential property income, but this amount will reduce by 25% each income year until the ability to deduct the interest is completely phased-out from the 2025–26 income year. If you have a standard balance date, the proposed change will be phased in as follows:Income yearPercent of interest you can claim1 April 2020–31 March 2021100%1 April 2021–31 March 2022 (transitional year)1 April 2021 to 30 September 2021 - 100%1 October 2021 to 31 March 2022 - 75%1 April 2022–31 March 202375%1 April 2023–31 March 202450%1 April 2024–31 March 202525%From 1 April 2025 onwards0%

King Jeffa knows all....

[Frezzinghot]

If you acquired a property before 27 March 2021, you can still claim interest (for loans that already existed for that property) as an expense against your residential property income, but this amount will reduce by 25% each income year until the ability to deduct the interest is completely phased-out from the 2025–26 income year. If you have a standard balance date, the proposed change will be phased in as follows:Income yearPercent of interest you can claim1 April 2020–31 March 2021100%1 April 2021–31 March 2022 (transitional year)1 April 2021 to 30 September 2021 - 100%1 October 2021 to 31 March 2022 - 75%1 April 2022–31 March 202375%1 April 2023–31 March 202450%1 April 2024–31 March 202525%From 1 April 2025 onwards0%

King Jeffa knows all....

Thanks for the explanation Jeffa

[mrsym0r]

Hi
The way i understand it.....

My Interest bill is $25000 per annum
My Rental Income is $25000 per annum
$25000 interest - $25000 income = no tax to pay.

Now
My Interest bill is $25000 per annum cant be claimed anymore.
My Rental Income is $25000 per annum
$25000 income = $3400 tax to pay roughly

So I am out of pocket $65 per week.

Who is effected ?
My tenant....if I try to get back to where I was yesterday...their rent goes up $65 per week.

or

Me....my income in my retirement has gone down $65 per week if I dont increase rent.

Richard

How do you figure that? Company tax rate of 28% would mean you're now out of pocket $135 a week.
I suspect a lot of negatively geared investors will be sweating

[richard56]

"How do you figure that? Company tax rate of 28% would mean you're now out of pocket $135 a week."

Yes your correct.
I just did a quick and nasty Google search on tax on $25000 just to have some numbers.
But yes it will cost some one...me or my tenants.
Richard

[McDuck]

Hi

So I am out of pocket $65 per week.

Richard

Thanks Richard.

Do you feel that the whole landlord situation has become financially unsustainable?

Would you be looking to exit the Landlord game?
(Or is it still the best game in town?).

Do you feel that the recent 25% gain in asset value more than makes up for this temporary slight cashflow reduction.
Does that 200k per property you just made soften the slight revenue loss?

[richard56]

If you acquired a property before 27 March 2021, you can still claim interest (for loans that already existed for that property) as an expense against your residential property income, but this amount will reduce by 25% each income year until the ability to deduct the interest is completely phased-out from the 2025–26 income year. If you have a standard balance date, the proposed change will be phased in as follows:Income yearPercent of interest you can claim1 April 2020–31 March 2021100%1 April 2021–31 March 2022 (transitional year)1 April 2021 to 30 September 2021 - 100%1 October 2021 to 31 March 2022 - 75%1 April 2022–31 March 202375%1 April 2023–31 March 202450%1 April 2024–31 March 202525%From 1 April 2025 onwards0%

King Jeffa knows all....

Hi
What happens if I renew an existing IO loan to a P&I after that 27th date ?
In that renewed loan considered new or existing?
Thanks
Richard

[Jeffa]

"How do you figure that? Company tax rate of 28% would mean you're now out of pocket $135 a week."

Yes your correct.
I just did a quick and nasty Google search on tax on $25000 just to have some numbers.
But yes it will cost some one...me or my tenants.
Richard

You have to account for inflation once it is fully phased in so you can expect rents to exceed $1000 per week by 2025.

[Lodestar]

The settlement date is 15th Apr, so we missed out? No claim for interest. Agreement signed yesterday.

[McDuck]

JOB

You have to account for inflation .....

Will you be financially affected by the tax changes?
From memory, you've already exited your 70K pa job, so wouldn't be claiming tax back from your PAYE anyway..
You're a buy and hold player, so youre not affected by the brightline shift.
So .. life usual for you?

[richard56]

Thanks Richard.

Do you feel that the whole landlord situation has become financially unsustainable? For someone already in the game for 8 years...not yet.

Would you be looking to exit the Landlord game? Not in the next few years but it would be nice if the goal post in this game were not constantly moving.
(Or is it still the best game in town?).

Do you feel that the recent 25% gain in asset value more than makes up for this temporary slight cashflow reduction.
Does that 200k per property you just made soften the slight revenue loss? ???? What 25% you shouldn't read headlines...i have one rental in Papakura only.
It went up just under 6% between Jan and now $40,000 of UNREALISED gain
Nowhere near $200k or 25%

see above
Richard

[crashy]

My interest is currently around $7300 p.a so about $140/week for me by the time it's phased in. I've got my rental leases with a clause stating that rent increases $25/week every year, so I won't be able to increase more than that. But in 3 years I will be getting $150/week more in rent so all up I will be ahead by $10/wk