WCC 3: Reduce your taxes significantly!

Good morning, morning all. Jason here. Up for a coffee and a chat this morning. Hopefully everyone’s well. A but chilly in my neck of the woods, probably not as cold as down South as it’s been for a little while, but anyway, got my Mr Happy on and a nice cup of coffee. It’s coming to that time of the year, end of the financial year. And last night I had a good catch up with our property investment crew, our mentoring program. We talked about minimizing taxes. Hey, listen, it’s not about how much you make, it’s about how much you keep. And as a property investor, we’re exposed to significant amount. Morning, Trina. A significant amount of taxes. And if you’re smart, if you’re smart, you can reduce them significantly. One of the major benefits to owning real estate is a thing called depreciation. So depreciation, for those who own property in their own names, I think most people should own property in their own names because it’s very efficient. You can get your taxes down to single digits. So, imagine this. Imagine you’re making 100, 150, $200,000. Imagine instead of paying 35, 40, 45 cents in the dollar, imagine paying 5 cents in the dollar for taxes. Would that be all right? What do you reckon about that? And that’s the fantastic thing about owning real estate. Now, a lot of people get confused here. You get all these tinpot turkeys carrying on about oh, negative gearing and all this sort of stuff. Those idiots don’t know what they’re talking about. They don’t know their rear from their arse hole. And at the end of the day, if they don’t want their tax deductions, then give them to me, I’ll have them. At the end of the day, here’s the drill. A tax deduction, for you as a property investor, or you who own a property, is a very normal, natural perfectly legitimate thing. Claim the bloody things, you guys. And when you claim your taxes back weekly, fortnightly and monthly, it’s called a PAYG variation. You can use that extra cashflow, it’s real money in your pocket. Morning, Jase, how are you bud? Catherine, how are you guys? This is a bit of a repeat from last night. You can use that money for saving for deposits, paying off debt, all sorts of stuff. Now, a lot of people don’t have spare cash flow because their life is finely tuned. What I always say is you’ve got wasted cashflow. Wasted cashflow you’re giving to the ATO. Cashflow for most people is the money you’re putting into super. If you’re not taking care of it yourself. Wasting cashflow, in my world, is a principle and interest payment on your home loan in the acquisition stage. Right, in the acquisition stage, why pay your home off if you’re trying to buy properties? That’s not the point. Morning, Tim. So minimizing your taxes. The point is to keep more of that money, gang. And so what are the big four taxes, the big for taxes? PAYG, your everyday tax that you pay on earnings. Stamp duty. Stamp duty as property investor. Capital gains tax, as a property investor. And also, land tax, as a property investor. Now, for anyone listening in or anyone watching, there’s a surefire way of never ever, ever to pay capital gains tax as a property investor. Anyone know what it is? Chuck it in the chat, if you’re there . Anyone listening in, if you got a question, chuck it in the chat. Happy to have a bit of a yam this morning. But listen, the number one, surefire way of not to pay any capital gains tax as a property investor is don’t bloody sell your properties. Why would you sell them if you bought them? I don’t understand that sort of thing, but really, for some of us, we might have it in our strategy. I have coached people about selling and upgrading their properties. But the big four, your income taxes, your PAYG. Land tax. Stamp duty. Capital gains tax, how do we minimize it? Number one, PAYG, when you own a property, you can claim your taxes back, it’s called depreciation. You don’t have to have a negative cashflow, you don’t have to lose cash to claim your taxes. Own brand new property gives you fantastic tax deductions and claim back weekly, fortnightly and monthly, guys. At the end of the day, if you’ve left money with the ATO, or let’s say this, if you owe the ATO money, they’re gonna charge you interest. And then, you leave your taxes with ATO all year and then you claim it back at the end of the year and they pay no interest? It’s ludicrous, it’s insane, all right. If you don’t know what I’m talking about, shout out to us, we’ll point you to the right direction. Come on to one of our property investment nights. So, PAYG taxes, claim your taxes back weekly, fortnightly, monthly in your pay pack, it’s called PAYG variation. Now, how do you minimize stamp duty? Well, stamp duty, the cost of stamp duty is different in each state and anyone listening in last night, we talked about this in our mentoring last night. The lull of stamp duty in the country is in the ICT and you can claim the stamp duty and the ICT as a tax deduction first year. That’s crazy, the politicians look after themselves, huh? So, different states have different stamp duty so think about that. The difference can be sort of five to $10,000 in different states. Also, if you purchase a house and land package, if you build a house, you only pay stamp duty on the land, not on the house. So that’s another way of significantly saving on stamp duty. In some case, 50, 60% saving on the end value of the property. A brand new property, low stamp duty. I like that, we love building houses, we think they’re great. Land tax, how do you minimize land tax? Number one, you buy in different states. Because there’s a threshold in your name in each of the states, and if you buy three or four properties in different states, you’ll end up with a zero land tax. But if you own them all in one state, you’ll end up paying land tax, which is ludicrous, it’s a lot of money out of your pocket, longterm. And as your values go up, get this, you buy now and then your values go up, you’re like oh, I like Victoria. I live here, I’m gonna all buy in Victoria. Well, then, when you’re gonna retire, Victoria is gonna take 20 to $30,000 of land tax out each year. It’s dumb, okay. It’s not smart, as a property investor, to buy everything in one area. There’s many reasons why, the risk is too high. You should, at least, have three different states and at least two types of properties. Houses and apartments, I like. A good mix of both ends. But another way to minimize the land tax is to buy apartments, not houses. The land content is less in the future, often if you buy the right apartment, the rental will be more and the expenses will be less. Mm, yeah. That’s popping in the oven there, isn’t it? Isn’t it property, isn’t houses better, Jason? Well, depends what better means to you. Do you want more cashflow when you’re retired. Who cares what your property’s bloody worth, as long as it’s producing cashflow. So, do you want more taxes because you own more land? Or do you want more income because you own better income-producing assets? You answer the question because I know what I like and in my future, I’m gonna have lots of assets with a lot of land content, but high income capability and the values will be still pretty good. So where did we get to? Land tax. We’ve done stamp duty, we’ve done PAYG. Capital gains tax, the last one, the big Kahuna. Listen, I don’t think you should sell, but if you do sell, there’s ways to minimize that obviously. Own a property more than 12 months and then you get a deduction, a 50% deduction of capital gains tax if you do sell. Owning your own home, place of residence, capital gains tax free. It’s one of the only reasons I encourage people to own a PPR, Principal Private Residence. If you own , super, okay. In accumulation phase which is when you’re not retired, capital gains tax is charged at 10% or tax is charged at 10%. And if in retirement, capital gains tax is zero. That’s pretty good. Now there’s some good reasons to make sure you’ve got enough assets in your super, that’s for sure. And last, but not least, for business owners. Aren’t there any business owners listening in today? If you own a property, if you buy a property for your business that you run your business from and you have owned your business for 15 years or more and you sell that property, you can include that property in the small business, capital gains tax concession, which is two million dollars. So, technically you can sell your property for two million bucks, capital gains tax free. Get that one, business owners, you should have that on your radar every day of the week. A lot of business owners make a mistake and accountants do this as well, where they go and buy the property in the super, for the business, which is great but then, you miss out on the capital gains tax free concession two million bucks external super. All right, so, I’ve got strategies around that which I think are smarter, but hey, listen. The end of the day, the idea game is to minimize your taxes, be smart about thinking into the future about what am I going to do and what is going to be the expenses, the cost of that, as a property investor, because it’s about how much you keep, not about how much you make. Cause if you can keep more than anyone else, if you can be more efficient than anyone else, you’re left with a compounding effect of wealth, cashflow, income, value in the future which will set you up very comfortably, very nicely for the life you wanna live. All right, that’s about it this morning with chatting about taxes. There’s so much more to chat about in that sort of stuff and all of you, I know there’s a few of you guys in the mentoring program, so if you didn’t come last night, if you didn’t come last night, I recorded a whole hour and a half on this last night. Ladies and gents, if you’re in the mentoring program, go to the positive mentor portal and you’ll the recording from last night. It was a cracker. For those who are in mentoring, you should bloody join. It’s fantastic . I’m a bit biased, but there you go. Anyway, thanks for tuning in, gang. Hopefully everyone’s well, stay well. Have a great day and, listen, if you wanna catch up or lost track, stay on. Facebook, website, whatever. Come along to one of our events and listen in a little bit more. All right, hopefully everyone’s well. Take care, thanks for dialing in, you guys. Hey, Kels, from up in Townsville. Michael, how are you, mate? All right, adios everybody, bye bye.

About the Author
From a small town boy growing up in the remote outback of rural Queensland, to becoming the founder of Australasia’s most powerful property wealth creation engine – Positive Real Estate Group CEO Jason Whitton is on a mission to change the way we look at wealth.