We are going to kick the year off with some very sound advice from Michael Yardney as he talks about the 12 important lessons for property investors in 2017. Smart investors are always learning and undertaking personal development. The property markets are dynamic, so dynamic in fact that you never quite “solve the puzzle” because the puzzle is always getting reshuffled in front of you right when you think you’ve got it solved. As Michael says  “The more I learn, the less I seem to know”.

This time last year, I asked some of our experts what they thought we would be saying about 2016 at the start of 2017. I check back in with them and play back their comments. This time last year Cate Bakos was concerned about APRA, unit vs house price differences and she thought the unit market might improve. So is she still concerned?

Andrew Mirams was another one of our experts we asked about what he saw ahead at this time last year and he predicted unit defaults. Find out what is he saying about 2017.

Meighan Hetherington shares a great story about how she discovered the fascination of becoming a property investor and how she now shares that passion with other investors.

Brad Beer answers a complex question from Grant Campbell about property depreciation and capital gain.

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Transcripts:
Is this a way to reduce capital gains tax? - Brad Beer
Kevin:  I have a question now from Grant Campbell. Thank you very much for your question, Grant. It’s directed at Brad Beer from BMT Tax Depreciation. He joins me on the line.

Good day, Brad.

Brad:  Hi, Kevin. Great to be here.

Kevin:  Now, this question from Grant, I know you’re going to have to give me a fairly general answer to this, but he does go into a bit of detail here. It’s about depreciation and capital gains tax.

If depreciation is added back to the cost base, this should reduce the capital gain and therefore the capital gains tax on sale. For example, if I claim $5000 depreciation for five years, that’s $25,000, and the property shows a $50,000 capital gain, then the gross capital gain is $25,000. As it’s been owned for five years there is a 50% reduction, that is $12,500 would be added to my income for the year when the property was sold. Is this correct?

Now, I understand, Brad, you might have to give a generalized answer to this, but can you cover that for us?

Brad:  Yes, Kevin, definitely. It’s a regular question that we do get about the capital gain being added, creating additional capital gains tax at the end. The simple fact is that yes, it does, and it means that the capital gains tax liability based on some of the claims will be higher.

Now, the building allowance component and the plant and equipment component are actually traded slightly differently, firstly. Without going into the complete detail on that, even aside from that, looking at the fact that what we get to do with deductions on the way through while we own this property is claim these deductions at our full marginal tax rate. When we sell a property and we pay a capital gains tax after 12 months, then we actually pay capital gains tax at half of our marginal tax rate.

And when you actually calculate this out in individual scenarios, most of the time – and there are a few dependencies, your tax rate and things here – what happens is that you actually get a deduction of more money than what you have to pay out in additional capital gains tax at the end because you make deduction on the full marginal tax rate, you pay capital gains tax at half the marginal tax rate.