mrd

Roger Bannister was the first man in history to break the four minute mile (1609 metres). His story is one that we ought to draw much personal inspiration from.

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MORE than 1100 immigrants and visitors on long-term visas are arriving each day, figures show.

The net migrant intake in the year to April was a record 200,000 people, an ABS report released yesterday says.

In the year ended March 2008, net overseas migration to Australia of just under 200,000 people accounted for over half, or 59 percent of Australia’s population increase.

The 430,000 overseas arrivals and 230,000 overseas departures represents an average of 1,180 overseas arrivals and 630 departures per day.

The states that lost people to net interstate migration include New South Wales (down 23,300), South Australia (down 4,100) and Victoria (down 2,400).The nation’s population reached 21.28 million in March, a 1.6 per cent jump on the previous year’s. Victoria added 87,600 people to reach a population of 5.27 million.

Queensland and Western Australia reaped the most from net interstate migration, gaining 24,300 (Qld) and 4,000 (WA) people respectively.

Source: Herald Sun Newspaper

About two years after each census is completed, the Australian Bureau of Statistics produces a set of population projections for all states, territories and capital cities. This document provides one input to demand modelling by federal and state government departments.  Some states also produce population projections but they generally follow the lead set by the ABS.

The previous forecast, issued in June 2004 and based on the 2001 census, shows the Australian population rising from 20.6 million in 2006 to 28.2 million in 2051.  This medium-growth outlook assumed falling fertility and net annual migration of 110,000.  Both these assumptions more or less reflected the prevailing paradigm in fertility and migration trends from the late 1990s.

Under this outlook, Australia would add 7.6 million residents over 45 years: 1.5 million being added to Brisbane, 1.4 million to Melbourne and 1.3 million to Sydney.  Outside the capital cities, Queensland was to add 1.4 million residents (mostly on the Gold Coast).

Within four years the ABS has changed its medium-growth assumption from 110,000 migrants a year to 180,000 migrants a year. Pushing the annual net migration assumption a further 70,000 over 45 years delivers an extra 3.2 million residents. The bottom line is that there has been a paradigm shift in the way demographers view Australia’s future and the key difference is immigration

Either Australians must “dense it up” to European proportions, or our cities must expand into greenfields locations and most likely within master-planned communities.

The outlook in the resource states is just as exciting. Over the 45 years to 2051, Brisbane will add 400,000 more residents than had been previously planned.

The new projections also bring demographic cheer to the regions.  Non-metropolitan Queensland (dominated by the Gold Coast and Sunshine Coast) will accommodate not 1.4 million extra residents over the 45 years to 2051, but 2.3 million. In just four years the outlook for regional Queensland has delivered a requirement to accommodate 900,000 extra residents. The two “coasts” will accommodate a large chunk of this, but what does this mean for the supply of and demand for land and water in cities such as Townsville, Mackay, Cairns and Toowoomba?

Bernard Salt, demographer | September 11, 2008

A woman has twins, and gives them up for adoption. One of them goes to a family in Egypt and is named “Amal.” The other goes to a family in Spain; they name him “Juan.” Years later, Juan sends a picture of himself to his mum. Upon receiving the picture, she tells her husband that she wishes she also had a picture of Amal.

Her husband responds… (more…)

It is a tough job for simple people like me to unravel the logic or meaning behind Tax Rulings at the best of times; but when the ATO goes and uses words like “impecuniosity”, I scream “plain English please!” I suppose it is actually a good thing when we are given the opportunity to expand our vocabulary; which I did recently when reading up on the whole subject of the “tax deductibility of capitalised interest”.

For many years I have capitalised my investment property expenses. Managing a portfolio of 13 properties has meant the interest rate rises of recent years had the potential to “hurt a lot”. Not having to pay those many expenses from my cashflow has been the difference between sailing through the storm or being shipwrecked along the way!

Having taken clear instruction from my accountant on this subject, I have always done the “right things” by the ATO. I keep a separate Line of Credit for all my investment property expenses; such as rates, body corporate levies, maintenance and so on; allowing me to preserve/protect my cashflow. I have always been diligent to pay the interest on our 13 loans from a personal (non tax deductible) Line of Credit. This is because of my understanding that to claim as a tax deduction any capitalising of interest would be to cross the line with the ATO.

It would appear, however, that recent rulings (PBR 80938, 79493 etc) have determined that it is perfectly OK to claim as a tax deduction any capitalisation of interest payments for an investment property (as with the related property expenses) on the condition that:

• My loans are kept separate and
• My primary reason for doing so is not to reduce my tax liability. That is, it is not part of a “split loan” which aims to pay off personal debt (such as a home loan, e.g.) faster.

Hanging over all of this, however, is “Part IVA”; which reads: “The incurring of compound interest depends upon a decision not to pay simple interest as it falls due. Sometimes such a decision will be compelled by impecuniosity”. My understanding of what this is saying is that if anything is done with a “dominant purpose of a tax benefit” it is not allowed. Where the word “impecuniosity” turned up (a word that neither my spell check or I were familiar with) is in a statement from the ATO that simply means you are too poor and cannot afford to pay.

My personal choice is to continue to make all interest payments from personal funds, only capitalising my property expenses. Like anyone I am allowed to capitalise my interest payments; I just cannot claim the interest on interest as a Tax Deduction; unless I found myself between a rock & a hard place unable to keep up with my payments and facing the prospect of a forced sale. Rather than falling victim of such drastic action, I would make application to the ATO for a “Private Ruling”.

Q: Why a “Private Ruling”?

A: Because if the ATO decides it can deem my action (to claim as a tax deduction capitalised interest), as taken primarily to avoid tax they will disallow the claim; and probably fine me.

Without a private ruling I would have to demonstrate to the ATO my impecuniosity.

Please email me at martin@investmentmentor.com.au if you have any questions.

Martin Bell

A few months ago my wife and I received an email from one of our property managers on this exact subject. Here is an exact copy of the request we received:

Hello Nick, Sorry to worry you when you are away. Your tenant has asked if you would object to her getting a cat. She has always had a cat and misses having one around for company. Would appreciate your response when convenient.

As I was traveling, I “hand balled” this to Katrina (my wife) saying that I had no objection if she didn’t and for her to respond to our property manager. Katrina’s reply to me was as follows:

I have said Yes to this based on having the correct clauses in the contract to cover any damage etc. I don’t have a problem with it as Belinda feels she will be a long term tenant.

Our agreeing to allow our tenant to have a cat came up came up in conversation with a friend some months later to which our friend questioned me: “Why would you let someone have a cat in your property”? My reply was very simple: “Because this is her home, it’s just our investment“.

Obviously we want to ensure that our properties are properly cared for, however, my tenant is my very high priority and I want to look after her and have her feel at home. Besides, with so few vendors prepared to allow small pets I can be pretty sure that I will hang onto my tenant for a long time (and at a higher rent).

Fortunately for her, the Body Corporate has said OK to small pets; however, this is not always the case and is sometimes the reason why a vendor must say no.

With the collapse of Lehman Brothers and the bargain basement sale of Merrill Lynch in the US, many economic commentators are predicting a second official rate cut next month in an attempt by the RBA to ease domestic financial conditions. Highlighting this renewed confidence, trades on the Sydney Futures Exchange indicate a 100% likelihood that rates will fall by 25 basis points on October 8th.

In all likelihood we will see higher levels of confidence return to the property market on the back of rate falls and demonstrated domestic stability. The most recent consumer sentiment figures released by Westpac and the Melbourne Institute have risen considerably during August and September, providing further evidence that market conditions are likely to improve.

With fewer buyers in the market, ABS statistics are highlighting a reluctance by developers to initiate the building of new housing projects. This may be good news for sellers, as the lack of new stock helps to underpin existing market listings with a floor price. Investors should also benefit as population growth and a general housing shortage will likely drive up rents in coming years.

Dwelling commencement figures recently released by the Australian Bureau of Statistics (ABS) show dwellings commencements have declined for the second quarter running. Construction on just 38,348 homes commenced in the three months to June, a seasonally-adjusted drop of 3.7% on the March quarter.

Source: My RPData

These Cairns Apartments have been designed to take advantage of one of the city’s most convenient sites. This 54 unit development is walking distance to shops, entertainment, schools and public transport.

Only 1 Left at this price! Furniture package included at settlement.

	Hi Nick and the team, can you enlighten me on the pros and cons of Auction sale for a property. When would one opt to use Auction as oppose to Private Sale and vice versa? Thanks, John
	Hi John and thanks for your question. While it may be advisable for some on the odd occasion, I don’t ever sell investment properties so it is not something that I have had experience with.

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With few exceptions buying and selling investment property within a five year period will cost you money; especially if you are selling one so you can buy another.

There are occasional times when selling an investment property makes sense and is your best option; but these are “exceptions to the norm”. Given purchase costs in (stamp duty & legal fees) and selling costs out (agent’s commission & capital gains tax; CGT) it’s easy for such an exercise to wipe out any “would be” profits…

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