While property investing may be simple, it’s not easy, and that’s not a play on words because many investors end up paying a huge “learning fee” or "Stupid Tax," as I like to call it.
That's because successful property investment comes down to much more than just knowing what you need, knowing what you can afford, and knowing exactly what’s available at the time you are ready to buy.
In reality, all property investors pay a learning fee of some sort.
You either pay the market and end up like most investors, never building the substantial property portfolio you’re looking for, or you pay to get professional advice.
In my mind, not taking early advice from professional means you'll ultimately end up paying a much greater fee.
So, in today’s podcast, I'm going to ask Ken Raiss, Australia's leading property tax strategist and director of Metropole Wealth Advisory, to share some of the common mistakes he has seen investors make in the hope that we can help you avoid those mistakes.
- The legislation will go into effect 30th of June, 2023.
- Legislation penalizes Queensland landowners with taxes on all their Australian land.
- Property owners who own in states other than Queensland will pay a higher land tax on their properties in Queensland.
- Selling up property in another state may be shortsighted.
- Land tax is a cost of business.
- Consider the fundamentals of why you bought properties in Queensland.
- A professional can help you find strategies to lessen the tax burden.
- Avoid making short-term decisions rather than long-term decisions.
- Between 50% and 70% of people do not have a will, so the government will decide who gets what, or a lengthy and costly court case will be required.
- We all want to ensure that the assets we pass down to our children are safe and capable of being used to maximum advantage.
- Many clients fear that these assets could be lost to the family if children divorce or are sued.
- The typical will does not protect the assets when they pass down, and in fact,
- Any income going to grandchildren, for example, is taxed at 66%.
- If your child goes through a divorce, the court will include these assets in any settlement.
- There is no flexibility in the distribution of income or capital gains in a tax-effective manner.
- If your child is sued either for wrongdoing or because of their job or as a company director, these assets are at risk.
- Lawyers typically do not consider taxation, impacts from the actions of the next generation, and flexibility. When a will is prepared, it is usually of a type that creates the risks mentioned before.
- Many people do not emphasize the technical issues of their super other than it is complying with legislation. This has the effect of potentially causing unnecessary hardships.
- At a technical level, there are many avoidable mistakes, as the following client scenarios highlight. All these issues could have been avoidable.
- Many people use trusts to secure assets for estate planning, asset protection, and tax management reasons. Unfortunately, many are incorrectly executed and operated, causing issues either with the ATO or on distributions.
- Typical client mistakes that we see include the following, which again would have been avoided with the proper documentation.
- The loan is in a different name than the title, which gives the ATO the reason to deny the tax deduction.
- Many discretionary trusts are subject to additional stamp duty and land tax dependent on the beneficiaries. This additional impost which effectively doubles each tax can be avoided.
- For many clients wanting tax benefits of negative gearing but need to use a trust, this is achievable with the correctly worded trust. Many people believe this is not possible, but it is.
- As identified earlier, life can take over, and we sometimes leave reviewing our personal factors too late.
- We encourage clients to see their professional advisor before they have to.
- Most people have accountants, lawyers, and even financial planners.
- Each profession looks at its silo of experience and skills and advises on that one aspect without considering the other professions or a client’s total needs. In many cases, what appears to be good advice fails when looked at more broadly.
- I cannot count the number of new clients who came to see us when the advice of one profession has not been practical to implement in conjunction with another.
- Now more than ever, the impact of various decisions impacts the outcomes of others. We need a trusted advisor who understands the various professions of tax, accounting, estate planning, super, and the law to ensure a practical solution is implemented which has an overall gain. This requires interaction between professions by someone who speaks their language, and doubt is eliminated.
Links and Resources:
Have a chat with Ken Raiss to ensure you have the correct asset protection strategies in place – click here
In turbulent times like we’re experiencing, why not get the team at Metropole on your side to give you holistic property and wealth advice– find out more here
Some of our favorite quotes from the show:
“I think a mistake some people are going to make over the next little while is make short-term decisions rather than long-term decisions and get out of property or sell property or not buy property because of these legislative positions.” – Michael Yardney
“I’m at the stage where my children are adults and reasonably well off, so I’m wanting to make sure my grandchildren get things.” – Michael Yardney
“Failures don’t end up writing books or conducting webinars or seminars, but you can probably learn more from those.” - Michael Yardney
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