“Non-commercial rental

If you let a property – or part of a property – at less than normal commercial rates, this may limit the amount of deductions you can claim.

Example 7: Renting to a family member

Mr and Mrs Hitchman were charging their previous Queensland tenants the normal commercial rate of rent – $180 per week. They allowed their son, Tim, to live in the property at a nominal rent of $40 per week. Tim lived in the property for four weeks. When he moved out, the Hitchmans advertised for tenants.

Although Tim was paying rent to the Hitchmans, the arrangement was not based on normal commercial rates. As a result, the Hitchmans cannot claim a deduction for the total rental property expenses for the period Tim was living in the property. Generally, a deduction can be claimed for rental property expenses up to the amount of rental income received from this type of non-commercial arrangement.

Assuming that during the four weeks of Tim’s residence the Hitchmans incurred rental expenses of more than $160, these deductions would be limited to $160 in total – that is, $40 x 4 weeks.

If Tim had been living in the house rent free, the Hitchmans would not have been able to claim any deductions for the time he was living in the property.”

This example makes it crystal clear. If you get caught fudging the figures, the tax office has made it as clear they will be cracking down hard. Don’t risk it. Help the kids buy their own property instead. There are a myriad First Home Buyer inducements out there.

Don’t forget you can still save for your first home with the Governments “First Home Buyers Deposit Saver Scheme.” No need to rush, house price’s may well come down 20% post 31 December 2009, as the depression deepens! So keep saving.

In the mean time speak to a quality Mortgage Broker about how much you need to save.

It seems all the original criteria remain the same, with just the date for expiry extended to 30th September 2009, in its current form and to 31st december 2009 with slightly reduced benefits. So get your skates on, free up your cash. Sell that expensive car and take the bus, cut out excessive spending on entertainment and clothes, give up smoking and take a part-time job. Above all save, save, save.

Unfortunately property prices have gone up because of the boost, but there are still some reasonably priced properties available and interest rates are at historical lows.

Do you have a granny who is ready for the nursing home? Why not buy her house? You could even let her stay as boarder after you take over. You will save on agents fees at least. She may be happy that her home is staying in the family.

There are heaps of things you can do to find a reasonably priced home. Please be innovative, think outside the square. However, make sure you abide by the rules of the boost. I hear the government will be checking up on people.

If you dont have a contact with a Bank or Mortgage Broker, I am now using Easy-Loans for my customers. All the work is done either by email, instant messenger or telephone, hassel free.

Four years ago the OECD (The Organisation for Economic Co-operation and Development) released a report revealing that: “AUSTRALIA had by far the most overvalued houses in the Western world, with prices 52 per cent higher than justified by rental values.” The report went on the say: “Australia was one of four countries where house prices were most out of line with fundamentals and that a correction of these inflated prices could generate an economic downturn, affecting growth, employment, government budgets and bank lending.”

So now in 2009 four years later we are in the middle of the biggest financial meltdown in the history of the world and our house prices have increased? I know Australia is a great place to live, but it just does not add up. Successive governments have subsidised the property bubble to an extent with first home owner grants and bonus’s, but that makes up a small part of the overall market. Why does our bubble continue to inflate, when will it burst and what will be the fallout for Australian residents and home owners? What will it mean for our major lenders and superannuation funds?

Consolidate your debts as soon as possible, get ready for a some rough property investment weather, but be ready to take advantage of the recovery if you can.

First home buyers who purchase established homes will now receive a grant of $14,000

First home buyers who contract to build a new home or purchase a spec type, newly constructed home will receive a grant of $21,000.

To qualify for a grant you must have never owned or had an interest in a residential property other than a block of vacant land. The same seems to apply if your spouse/domestic partner previously owned a residential property anywhere in Australia. According to the SA government fact sheet, a spouse/domestic partner must be included on your application.

The boost is applicable to contracts signed between October 14 2008 and June 30 2009.

For clarification of your position I suggest you contact a reputable mortgage broker, they will also be able to advise you about which lenders can be used to take advantage of the grant. You may also want to consult the relevant Government Department in your state. I also suggest you get information on the First Home Buyers Deposit Saver Scheme as well.

Property developers and vacant land owners should benefit from these changes the most. So if you have a piece of land that has development potential, get moving. This is why I like investment properties on their own title. The opportunities for wealth creation are always there, even in tough economic times.

Australians aged 18 and over at last have some help to save for their first home. The First Home Buyers Deposit Saver Scheme became a reality today as the first accounts were made available by a couple of the major banks.

The scheme essentially provides the opportunity for free money from the government. The more you can save for a deposit on your first home the less likely you will be slugged mortgage lenders insurance by your home loan lender. If you can keep your lvr below 80%, that is have a deposit of at least 20%, you can save thousands.

You could use the money not wasted on lenders mortgage insurance to furnish your new home.

Here are the facts:

The following is an extract from the official fact sheet presented by the Government of Australia Treasury 2008.

First Home Saver Accounts – Fact Sheet -

Account Holders Overview:

First Home Saver Accounts (FHSAs) are the first of their kind in Australia and will provide a simple, tax effective way for Australians to save for their first home through a combination of Government contributions and low taxes.

Eligibility
An individual can open an account if they: are aged 18 or over and under 65;
have not previously purchased or built a first home in which to live; do not have, or have not previously had, a First Home Saver Account; and provide their tax file number to the provider.
Penalties will apply if a person opens an account where they are not eligible to do so.

Contribution arrangements
Contributions may be made by the account holder or another party, such as an employer, on behalf of the account holder. Contributions will be made from after-tax income. The Government will make additional contributions which will be paid directly into the account, after the individual has lodged their tax return and the provider has submitted the relevant information to the ATO. The Government will contribute 17 per cent on the first $5,000 (indexed) of individual contributions made each year. This means an individual contributing $5,000 will receive a Government contribution of $850. No minimum annual deposit is needed to keep the account open. The account can remain open for as long as necessary or until the account holder turns 65, at which time it must be closed.

Level of tax on accounts
Contributions will not be subject to tax when contributed to an account. Investment earnings (or interest) will be taxed at a rate of 15 per cent. Withdrawals will be tax free. FHSA balances will be exempt from the income and assets test.

Account balance limit
There will be a limit of $75,000 (indexed) on the overall account balance. If an individual reaches the account balance cap, no further individual contributions will be able to be made. Earnings and any outstanding Government contributions will still be able to be credited to the account after this time.
Contributions that exceed the limit will be returned to the account holder.

Four-year savings horizon
To withdraw their funds, minimum contributions of $1,000 need to be made over the course of at least four separate financial years. If an account holder is purchasing a property with another individual(s) who also holds an account, only one account holder needs to meet the four-year requirement. If one person meets this, then the other individual(s) can also withdraw their funds.

Withdrawals for a first home purchase
Individuals will be able to withdraw their account balance tax free to buy or build a first home in which to live. The full amount will need to be withdrawn and the account closed. The individual will need to live in the home for at least 6 months within the first 12 months of purchase or completion of construction. Individuals can close their account and contribute the full amount to superannuation at any time. Penalties will apply to individuals where they fail to meet the withdrawal or occupancy criteria.

Other circumstances
Where an individual’s circumstances change during the life of the account so that they no longer wish to purchase a first home, they will not be able to access the account but can transfer the balance into superannuation and close the account. Penalties will apply if funds are withdrawn and not used to purchase a first home in which to live. If an individual moves overseas, they can continue to make contributions into the account, but will not receive any Government contributions. Individuals will be able to access their funds tax free once they reach age 60, consistent with superannuation.

Early release provisions
By transferring the account balance into superannuation, individuals may apply to access the superannuation early release provisions of severe financial hardship, compassionate grounds or terminal illness.

Account providers
Public-offer superannuation providers, life insurers, friendly societies, banks, building societies and credit unions will be able to offer the accounts. Banks, building societies and credit unions will be able to offer deposit accounts and superannuation providers, life insurers and friendly societies will be able to offer investment-linked accounts.

Anyone who is eligible should pursue this opportunity. Parents should encourage children, grand parents should encourage grand children. Speak to your mortgage broker, visit your bank or credit union. Get it happening, its free money.