Shukri Barbara Sought by investors for his common sense approach Shukri Barbara specialises in advising people with investments in property. Winner of ‘Your Investment Property’ Magazine’s Readers Choice Award as Best Property Tax Specialist for 2011, 2012 and 2014, Shukri Barbara is a CPA & CTA with over 30 years’ experience in public practice.
As Principal Adviser at Property Tax Specialists, Shukri combines his worldly, business and marketing experience together with his property tax specialty to support property investors with practical as well as technical advice on ownership structures, asset protection, (legally) minimising tax, cash flow analysis and generally guiding them through the journey of creating wealth with property. Shukri’s expertise is much sought after and has been interviewed on Sky TV’s your Money your Call program with Chris Gray on multiple occasions. He is also tax contributor to Your Investment Property magazine and has written tax columns for Smart Property Investor magazine.
When I started to jot down some brief tax information on buying property my first thoughts were “buyer beware” and the need for buyers to be logical and prepared. Being educated about property investing is one element needed to make better and informed decisions. Being an “aware buyer” helps in that the buyer will ask more and better questions – therefore improving the quality of decisions taken.
Before you Buy – Planning considerations
In making the decision to acquire property as an investment vehicle to create wealth, decisions have to be made about the ownership of the property. In what structure should you hold the property? The following structures are available:
- Partnership – jointly or tenants in common
- Company – not good for assets which appreciate in value
- Trusts – Unit, Discretionary, Hybrid, Testamentary, Super Fund
Before settling on a structure consideration should be given to the following:
- Asset Protection – generally from third parties. This is important for people running businesses. Employees are generally exposed to less risk. Where property is generally held for a long time
- Income tax planning flexibility – how to have income derived by the member of the family with low marginal income tax rate and how to have a negative gearing loss derived by the family member with the highest marginal tax rate
- Retirement planning – flexibility in owning assets and/or generating income to maintain lifestyle while accessing government benefits.
- Succession planning – where you want control and management to pass onto younger family members without having to sell and incur CGT, stamp duties and other transfer expenses.
After you buy – Management Considerations
In dealing with all institutions – particularly the ATO, documentation is critical. Because property is owned over a long time it is important you maintain original documents in a safe and accessible place.
These will be needed to calculate CGT on the sale of the property. A summary of the cost base and borrowing expenses are recommended at the time of preparing the tax return. Documents include: Solicitors settlement letter, Solicitors legal fees, Pest and Property Inspection report, Lender’s letter of approval and terms of the loan, Conveyance Stamp Duty receipt – if details not on solicitors letter.
After you take possession of an investment property, management is an issue. Tax matters pursued by ATO include:
- interest – deductible or not
- interest – who is it deductible to
- repairs (deductible) or improvement (capital write-off)
- depreciation of plant or capital write-off of building cost
- capital gains – was it declared, was it properly calculated
- private usage – holiday homes