This is part of a series of sessions on Finance for Pensioners and a solution to the Housing and Rental crisis in Australia
We have come to a number of conclusions
- Pensioners affected under the income tax pay 73% in tax
- In all property analysis use the 5.2% rule
- Community Housing Providers should not borrow money or build buildings
- Pensioners affected under the Income Test can borrow money.
- Retire or double your income in one year.
- Housing Affordability Trust is the only solution to the Housing and Rental Crisis
1 Pensioners affected under the income test pay 73% in tax
They lose 50cts in the pension and 23cts in tax, tax concessions and medicare
( See Session 1)
2 5.2% rule
Rent per week should be 1/1000 of the value of the property. A $300,000 property should have a rent of $300 per week . A $500,000 property should have a rent of $500 per week. A $20,000 caravan should have a rent of $20per week. Lease on a $100,000 block of land should be $100 per week. Also assume interest rate @ 5.2 % and analysis becomes very easy. You can do an analysis at these figures and then can easily see what would happen if interest rates increase by 1 % or rents increase by 1 %.
- Community Housing Providers should not build or buy houses
From the spread sheet in Session 10 it can be seen that Property Investment is most effective if a person pays tax because of tax deductibility of interest payments and depreciation allowances. The higher the tax bracket the more profitable an investment in property is.
Not-For-Profit organisations like Community Housing Providers do not pay tax and from the spreadsheet it is shown they should not build property.
NOT-FOT-PROFIT ORGANISATIONS SHOULD NOT BORROW MONEY OR BUY PROPERTY , ONLY MANAGE IT
- Pensioners affected under the income test could help solving the Housing Crisis
In session 1 we have seen that the highest tax bracket bar none is for pensioners affected under the income test. They pay 73% in tax if they earn or are deemed to earn more than $112 per week.
The average male balance in Superannuation is $430,000 and if you have more than $301,000 in super you are deemed to earn more than $106 per week and therefore are affected under the income test.
What if a person would withdraw $240,000 from super to buy an investment property.
It can be used to buy a property but should be borrowed back straight away to invest in shares.
To service a loan from the Bank you can borrow money from the government under the Home Equity Access Scheme and can borrow a minimum amount of ½ your pension which for the single pension will give you a fortnightly payment of $500 or $250 per week. This loan and the interest on the loan is accumulated and only has to be paid back when you die or sell the house.
This will service a bank loan of $300,000 but as an example we have used $240,000.
The reason a pensioner will never get rich from ordinary investments is that a pensioner pays 73% of all income in tax. If you invest in a new investment property and borrow the money, your interest on the loan and depreciation allowances will give you huge tax deductions.
THESE DEDUCTIONS WILL INCREASE YOUR PENSION
- Retire within a year
We have a number of property developments where the cost of the land is very low.
On each block of land with a size as little as 450m2 we can build a 3-Bedroom dwelling ($300,000 , $450 rent) and 2 x 1 Bedroom units ($180,000, 2x $275=$550 rent)) on top of each other. We have shown in Session 27 how you can retire in a year or double your income if you are in the 30cts or 45cts tax bracket.
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- The Housing Affordability Trust
The ultimate solution to the Housing and Rental Crisis
Principal Government Guaranteed
3% Growth . Government Guaranteed
5% Franked Income
Tax and Centrelink Friendly
Can be combined with any of the strategies in previous sessions but should be the centre platform for any plans for the future