The 2021 PIPA Queensland breakfast seminar is on Thursday 15 July 2021 at the Sofitel Brisbane Central.
The breakfast will be a chance to hear from PIPA chairman Peter Koulizos as well as from two expert speakers.
PIPA chairman Peter Koulizos will provide an update on the association and the national market.
REIQ CEO Antonia Mercorella will outline how state-based legislation is impacting property investors now and into the future.
Herron Todd White Director David Hyne will provide insights into the challenges of assessing property value in rising market conditions.
A light breakfast will be served.
PIPA members will earn five CPD points from attending. Of course, it will also be an opportunity for everyone to network, so it really is a must-attend event.
Don’t delay in registering as you really don’t want to miss it!
Soaring house prices have given most of Australia’s 2.2 million property investors a financial boost this year, and some clever tax moves in the next two weeks can make them even more money.
The end of June offers a unique time for investors to pay expenses now and then claim a tax deduction for it just a few weeks later.
From maintenance and repairs to insurance and council rates, there’s a wide range of deductible payments.
Property Investment Professionals of Australia chairman Peter Koulizos recommends speaking with your accountant to discuss what’s possible before this financial year ends in a fortnight.
“You want to be as well prepared as possible when 30 June comes along because there’s no turning back the clock on some things,” he says.
Here’s the expert guide to the big tax deductions that investors often fail to maximise.
PREPAY NOW
“You could pay a bill on June 30 then claim it back from July 1, and prepay some interest in June then claim it back in July.”
Real estate investor Prue Muirhead, who owns 16 positively-geared properties and runs a property management business, says she uses the flexibility of prepaying investment loan interest to “optimise our tax savings”.
Some investors pay their annual landlord insurance premium just before the end of each financial year, and Muirhead is closely watching her insurance costs following a turbulent 2020.
“There were many of our insurance policies paid during the height of Covid that were changed, even when we renewed with the same insurer,” she says.
DON’T IGNORE DEPRECIATION
Depreciation is a deduction for the declining value of a property’s carpets, curtains and other fittings, and even its bricks and mortar, but because investors don’t physically pay the money they often under-claim.
The Australian Taxation Office has free 52-page guide, Rental Properties 2021, that also helps explain the rules
Research by BMT Tax Depreciation compared its clients’ deductions with ATO data and found that 70 to 80 per cent of Australian investors don’t maximise their claims.
BMT managing director Bradley Beer many investors “may claim something” but miss out on all the depreciation deductions they’re entitled to.
“The average first-year deduction last year (for BMT clients) was $9000,” he says.
A depreciation report from a quantity surveyor typically costs about $700, which is itself tax deductible, and while government rule changes in 2017 stopped some items being deducted, the large capital works deduction available for construction costs remains.
“Any quantity surveyor should be able to see some pictures of your property, and with a couple of questions be able to identify if it’s worth doing,” Beer says.
Investors can also amend tax returns going back two years, so it’s worth acting fast, he says.
Property management firm: Different’s head of leasing, Kasey McDonald, says accountants view depreciation reports “very favourably”.
QUICK FIXES
McDonald says maintenance such as servicing airconditioners and cleaning out gutters can be done before June 30 to boost deductions.
“If they do it in July or August they have to wait another 12 months to make that claim,” she says.
“Where possible you should have most of your expenses being managed by your property manager – things like water rates and body corporate fees.”
Managers pay your bills out of rent received, and you get a nice clean summary of ins and outs at the end of the financial year.
BMT Tax Depreciation CEO Bradley Beer says many property investors under-claim.
Home seekers will need to ask vital questions before buying in the hot current market, writes Aidan Devine.
PERFORMING basic property checks and due diligence has become critical for househunters in the booming market, experts warn.
The frantic pace of sales has put home seekers under pressure to make snap decisions, with prices rising nationally at the fastest rate in 32 years in March, according to CoreLogic.
With buyer competition expected to stay strong, property advisers said home seekers could mitigate the risks of buying quickly with some key due diligence checks: HOW BANKS VIEW THE PROPERTY Real Estate Buyers Agents Association president Cate Bakos said the most critical step in the due diligence process was making sure banks would finance the purchase.
“Doing due diligence is checking anything that could prevent you from being able to buy. Getting a loan for the property is obviously a big part of that,” Ms Bakos said.
“Some banks won’t lend for certain properties, locations, zoning or title types if the purchase is with less than a 20 per cent deposit. You need to understand what banks don’t like.” Attributes that could result in banks knocking back a loan application included flood or fire risk.
Lenders also viewed areas with an oversupply of housing as a red flag, as it raised the risk of prices falling and the property becoming worth less than the purchase price.
Oversupply was a particularly common problem in high-density areas with a glut of new apartments up for sale, Ms Bakos said.
“Banks at any time will have a list of postcodes they don’t want to accept, it’s not always publicised but a mortgage broker will be able to tell you,” she said.
“Of course, if you’re only borrowing 60 per cent of the value, banks see it as a lot safer and you will probably get the loan, but very rarely do people have that.” HOW PRICE COMPARES WITH VALUATION Another vital due diligence check, and one closely linked with financing, is how the purchase stacks up with the “market value” of the property.
Banks send independent professionals to value properties before they can approve a loan. And this means problems can arise if the valuer determines the home is worth less than the price paid.
Property Investment Professionals of Australia chairman Peter Koulizos said buying at a reasonable price was particularly important in the current market, where emotions were running high.
“There are a lot of vendors putting properties up at ridiculous prices,” Mr Koulizos said. “Always find out what comparable properties have sold for.
That’s properties that are in similar condition in the same location and have the same land size. Don’t go further back than three months. The comparable prices for sold properties will be a much better indication than the agent (guides).” Empower Wealth Advisory founder Ben Kingsley said buyers could avoid overpaying by keeping in mind the attributes that often devalued a property.
Examples were a location on a main road or under a major flight path, high voltage power lines or being outside the catchment area of a popular school, Mr Kingsley said.
An easement which gave a range of third parties the right to use part of the land had a significant negative impact on value, he said.
WHAT’S IN THE CONTRACT Having a conveyancer do an extensive review of the sale contract was an obvious step in the due diligence process but one many buyers skipped, Ms Bakos said.
“Some people think they can read contracts themselves or they simply put blind faith in the agent,” she said.
“Other times it’s too fast a review from the conveyancer or they didn’t have all the details to recognise what important bits of information needed to be in the contract.” Important items for a conveyancer to check were whether extensions on the property were council approved, and outstanding caveats and debts on the property.
In some states, vendors are also required to disclose any issues they are aware, of such as asbestos, but Ms Bakos cautioned buyers not to assume the sellers would be upfront.
“It’s what vendors know about and they can play dumb,” she said. “Whatever is discovered after the purchase is up to the buyer to rectify. It’s up to you to manage the risk.” Issues such as structural weakness, termites or other unforeseen problems could usually be uncovered by having a building and pest inspection done, Mr Koulizos said.
“Get an inspection report in writing,” he said. “Oral reports are not worth the paper they’re not written on.” OTHER LOCATION ISSUES Local councils can help with other important due diligence checks, according to Ms Bakos.
“Find out if there are any development approvals in the area. If there is an approval for a double-storey house next door, it can catch people out when they realise they’re now overshadowed,” she said.
“You also want to check if there is going to be any road widening or zone changes.
It all makes a big difference.” Neighbours were another factor frequently overlooked, Ms Bakos said.
“You want to have an idea if there are troublesome neighbours.
“Try to check out the street at different times to the inspections.
“If you’re in doubt, knock on a few neighbours’ doors.” Those buying in apartment blocks could discover any issues within the building by asking the agent for the minutes of the last strata general meeting.
The minutes will reveal if there are expensive problems, such as flammable cladding. Any talk of engineering reports should be a red flag as this suggested structural problems, Ms Bakos said.
GETTING A HELPING HAND Performing thorough due diligence is an exhausting process, but buyers do not have to do it alone.
Mortgage brokers, real estate agents, local council and buyer’s agents, if you are prepared to pay the extra cost, can help smooth the process.
“There are more than 40 variables you need to look at when buying,” Mr Kingsley said.
“It’s a lot but you don’t need to do everything yourself.”
Aidan Devine, Hobart Mercury, Hobart, Page 6, 10 June 2021
The recipe for investing in a healthy retirement is best served three ways.
Saving for retirement seems complex but the truth is, there are really just three simple ingredients to help create a sizeable nest egg.
Despite millions of investment options available, almost every growing asset stems from real estate or businesses, while superannuation delivers the best structure for tax savings.
Cash, too, is an investment class and vital in reducing risk for retirees, but with interest rates effectively zero delivering negative returns after inflation it’s not a growth asset.
Investment platform eToro Australia’s managing director, Robert Francis, says it starts with considering what your own ideal retirement looks like “and what kind of financial position you’d need to be in to realise that”.
So what should you tackle?
SHAREMARKET
Shares in businesses can deliver scary short-term volatility but over the long term have delivered strong investment returns averaging 7-8 per cent annually.
Francis says the proportion of shares to hold depends on your risk tolerance and strategy, but generally, younger investors and super fund members hold more.
“Overall, it’s a good idea to focus your portfolio either mostly or entirely on growth until you reach middle age, at which time your objectives may shift towards consistent income generation and lower risk,” he says.
A portfolio can contain global giants such as Amazon, Apple and Google as well as Aussie favourites such as the big banks and resources giants.
“You can also add in ETFs, commodities, crypto and real estate if that’s your thing, too,” Francis says.
“If you start building your retirement portfolio sooner, it’s likely that these investments will mature over time and be ripe for the picking once you hit retirement.”
PROPERTY
Property Investment Professionals of Australia chairman Peter Koulizos says rental properties as a retirement strategy have become “more and more popular”.
Real estate investments deliver both capital growth and rising rental income, but people shouldn’t focus solely on property because it is not a liquid asset and can’t be sold off in pieces. “You either have to sell all of it or none of it, and that’s why you need alternatives such as shares or an income stream from your super,” Koulizos says. “The reality is you should spread your risk.” Property investors should consider putting extra cash into super as they approach retirement rather than paying down their property debt, and professional advice is important.
“When you pull it out of super it’s tax-free, but all the rent you earn from an investment property is taxable,” Koulizos says.
This is a key reason why owning real estate within a self-managed super fund is attractive.
SUPER
Superannuation is not an asset itself it’s a structure for holding assets, and financial strategist Theo Marinis says it works well because of its tax benefits and forced saving model.
“We’re human, and the more we earn the more we tend to spend,” he says.
“The reason people build super nest eggs is because they don’t notice it going in, it’s in a tax-effective environment and it grows.” Earnings in super are taxed at 15 per cent while saving for retirement, and typically zero per cent after you retire.
“The downside is you can’t access it (until age 60) that’s why you don’t go putting all your eggs in one basket,” Marinis says. “There’s no secret to this stuff it’s putting money away for a long period and letting compound interest do the work for you,” he says.
Retirement portfolio tips:
Before investing, work out what you need to comfortably retire. Moneysmart.gov.au has calculators that project super and compound investment returns.
Diversify your savings, including Australian and international investments, to lower risk and smooth out returns.
Have a long-term investment strategy that rebalances often and avoids knee-jerk reactions.
Reduce growth assets and increase conservative investments in the decade before retirement.
Keep an eye on fees, which can eat into super and investment returns.Source: eToro, Moneysmart.gov.au
Anthony Keane, Daily Telegraph, Page 32, 9 June 2021
Saving for retirement seems complex, but the truth is there are really just three simple ingredients to help cook a big nest egg.
Despite millions of investment options available, almost every growing asset stems from real estate or businesses, while superannuation delivers the best structure for tax savings.
Cash, too, is an investment class and vital in reducing risk for retirees, but with interest rates effectively zero – delivering negative returns after inflation – it’s not a growth asset.
Investment platform eToro Australia’s managing director, Robert Francis, says it starts with considering what your own ideal retirement looks like “and what kind of financial position you’d need to be in to realise that”.
SHAREMARKET
Shares in businesses can deliver scary short-term volatility but over the long term have delivered strong investment returns average 7-8 per cent annually.
Francis says the proportion of shares to hold depends on your risk tolerance and strategy, but generally younger investors and super fund members hold more.
“Overall, it’s a good idea to focus your portfolio either mostly or entirely on growth until you reach middle age, at which time your objectives may shift towards consistent income generation and lower risk,” he says.
A portfolio can contain global giants such as Amazon, Apple and Google as well as Aussie favourites such as the big banks and resources giants. “You can also add in ETFs, commodities, crypto and real estate – if that’s your thing too,” Francis says.
“If you start building your retirement portfolio sooner rather than later, it’s likely that these investments will mature over time and be ripe for the picking once you hit retirement.”
PROPERTY
Property Investment Professionals of Australia chairman Peter Koulizos says rental properties as a retirement strategy have become “more and more popular”.
Real estate investments deliver both capital growth and rising rental income, but people shouldn’t focus solely on property because it is not a liquid asset and can’t be sold off in pieces.
“You either have to sell all of it or none of it, and that’s why you need alternatives such as shares or an income stream from your super,” Koulizos says.
“The reality is you should spread your risk.”
Property investors should consider putting extra cash into super as they approach retirement rather than paying down their property debt, and professional advice is important.
“When you pull it out of super it’s tax-free, but all the rent you earn from an investment property is taxable,” Koulizos says. This is a key reason why owning real estate within a self-managed super fund is attractive.
SUPER
Superannuation is not an asset itself – it’s a structure for holding assets, and financial strategist Theo Marinis says it works well because of its tax benefits and forced saving model.
“We’re human, and the more we earn the more we tend to spend,” he says.
“The reason people build super nest eggs is because they don’t notice it going in, it’s in a tax-effective environment and it grows.”
Earnings in super are taxed at 15 per cent while saving for retirement, and typically zero per cent after you retire.
“The downside is you can’t access it (until age 60) – that’s why you don’t go putting all your eggs in one basket,” Marinis says.
“There’s no secret to this stuff – it’s putting money away for a long period and letting compound interest do the work for you,” he says.
Superannuation is the most tax-effective structure for holding retirement assets, experts say.
RETIREMENT PORTFOLIO TIPS
Before investing, work out what you need to comfortably retire. Moneysmart.gov.au has calculators that project super and compound investment returns.
Diversify your savings, including Australian and international investments, to lower risk and smooth out returns.
Have a long-term investment strategy that rebalances often and avoids knee-jerk reactions.
Reduce growth assets and increase conservative investments in the decade before retirement.
Keep an eye on fees, which can eat into super and investment returns.
If you are looking to finance your holidays or diversify your investment portfolio, buying property overseas can come with many challenges, but the rewards can also be high.
“Suppose you own an investment property several hundred kilometres from your home, and you need a plumber to replace taps in the bathroom?” says Peter Koulizos.
“If the property is managed by a competent property manager, it shouldn’t be a problem.
“They should organise quotes, arrange access to the property for the repairs to be done and pay the bill on your behalf.
“This is OK in Australia where we have strict rules and a code of ethics that most property professions should abide by, but that cannot be said of all places around the world.
Buying property overseas can be fraught with difficulties for many reasons.
They include;
■ Arranging finance – Australian banks are hesitant to lending money to borrowers who wish to buy property overseas.
■ Lax property laws – Australia’s property laws are very tight, with parties’ rights and obligations being made very clear. The same can’t be said for many countries around the world.
■ Tax issues – you may need to find an accountant overseas as you are earning income overseas, and you may need to pay tax in that country.
■ Different language and culture – the landlord/tenant relationship varies considerably around the world.
■ More susceptible to being ripped off as you are an absent landlord – the temptation is there as they know there is not much chance that you will fly over each time there is an issue.
■ Currency risk – “This last point is very important,” says Mr Koulizos. “Not only do you need to do your due diligence before you purchase the property and try and keep an eye on it from afar, but you are also susceptible to moves in the currency.
However, according to Mr Koulizos, there can also be some advantages.
“Some of my students bought property overseas straight after the GFC when property prices plummeted in some countries and have since seen marked capital growth as the overseas property market has picked up.
“The benefits of buying property overseas can include a relatively cheap entry price and high rental returns.
“If you are seriously considering buying overseas, you need a local lawyer who can also speak English, a bi-lingual property manager and possibly an accountant.
“Your due diligence should also include visiting the area and inspecting the properties you wish to buy.”
Overseas investing is fraught with danger if you don’ thave the right research and it also brings currency riskthat can sometimes erode part if not all of your gains. It is vital that you conduct your due diligence as different markets operate in different ways.
■ Peter Koulizos is a Master of Property instructor at the University of Adelaide and the chairman of the Property Investment Professionals of Australia.
Peter Koulizos, Western Advocate, Bathurst, Page 4, 3 June 2021
