If you’re thinking of selling your investment property, the end of financial year is the perfect time to sit down and get your affairs in order. Start by calculating what the cost of keeping your investment might look like, it could help you decides to sell now or hold on to your investment.
First think about all those monthly and quarterly outgoings inclusive of interest payments, rates, body corporate costs and of course agent fees. Don’t forget the little annoying extras as well, like annual insurance and smoke alarms.
If you threw yourself into the motto of “buy the worst house on the best street” a little too whole heartedly and didn’t end up with the resources to fully fix her up, then you’re also going to have to take into account pesky ongoing maintenance bills.
What you’re going to do now is determine your net return.
This is your gross rent collected, less all those costs we forced you to recount just now. Don’t despair this figure may look disheartening, but it’s actually going to help make some of the decisions for you. If you take the time to go through this process you’re going to see that your investment is either giving you a cash surplus or cash deficit. Meaning you’re either positively or negatively geared.
Did you discover you had a cash deficit? Well I imagine you’re thanking the heavens that Labour did not win the election and dispense of the benefits of negatively geared property offsetting. So you’ll be able to offset the losses against other income in order to reduce your tax liability. Pheww…
Keep in mind though that tax benefits can change on a government whim and as investment ledged Noel Whittaker’s golden rule states “Always judge an investment on its merits – any tax benefits should be regarded as cream on the cake”.
Therefore if the cost of keeping your investment outweighs the benefits then it might just be time to cash in on your capital gains tax, or CGT in the new financial year. But don’t just rush into getting it on the market with whoever your managing agent is. Like we’ve discussed before do some research into their selling methods and skills and find the best agent for your needs.
Selling at the turn of the financial year offers some great capital gains tax benefits, deferring payments for up to 12 months in some cases, which enables you to either roll over your investment or earn interest on your CGT for a whole year! For the best results always make sure to discuss your unique financial situation with a professional tax agent.