Friday, March 23, 2018

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Forget images of wrinkled old women in even wrinklier stockings, offering slobbery kisses and endless cups of tea, nowadays thanks to women like Goldie Hawn, Susan Sarandon and Kris Jenner there is plenty of glamour in being a grandmother. And thanks to the increasing need for affordable housing, granny flats, too, are becoming a hot item. 

Over the past few years, there has been a spike in the demand for granny flats on online accommodation websites. So, whether you rent yours out to a third-party - or use it for the original purpose of housing a family member - granny flats offer a low-cost way to make the most of your property assets. But before you rush out and plonk one in your back yard, as always, there are plenty of pros and cons to consider. 

Granny Flat Gains

Keep them close
Having your aging loved ones close at hand gives extra peace of mind, and offers them the sense of freedom missing in many age-care facilities. And, should you stick your teenager in your granny flat, it ticks exactly the same boxes, by giving them a sense of independence, while keeping them within handy nagging distance!

Cost benefits
Retirement villages and aged-care facilities are not cheap, and the ongong costs can quickly sap even the most generous of nest eggs. In comparison, your average two-bedroom 60m/sq granny flat costs around $120,000 - a fraction of the price of sheltered care or even the most basic investment property. And if you decide to rent out your granny flat, in Sydney the current average weekly rent is $346 - not a bad return on your investment. 

Ease of consent
If you are looking to subdivide or make major renovations to your property, you can face a lot of red tape, but a few years ago in NSW the government passed a new planning policy to help fast-track affordable housing. As long as your granny flat meets certain criteria, you could see your plans approved in just a couple of weeks. 

Granny Flat Grumbles

Loss of privacy
Unless you have a huge garden, building a granny flat in your backyard is going to compromise your sense of privacy and your property's garden area. Of course, when you come to move home, this will rule out any buyers looking for a garden, and limit your market to those seeking a house with a self-contained flat. 

Rules and regulations
In NSW, the laws concerning the use of granny flats are pretty relaxed, but in other parts of Australia they are alot stricter. Although not enforced with a heavy hand, in Victoria, Queensland and South Australia, granny flats can't be leased as rental properties. And even in those states that do permit it, you mustn't fall foul of local government regulations concerning parking and tenancy laws. 

Tax implications
As with every financial transaction in life, you have got to think about taxes. If you are earning a rental return on the granny flat, there will be knock-on effects on your tax bill, some positive; some negative. A main point is that by building on your existing property, when it comes to selling both dwellings together, the capital gains tax you will pay on the rental unit will have a knock-on effect on your main dwelling. 

However, by talking to experts at every step of the process - your broker, lawyer, surveyors, planners - building a granny flat will help strengthen your family's bonds... and in the long-term boost its finances.


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We have all heard the old adage that you need to speculate to accumulate... but when it comes to investing in property, if you want to maximise your returns, you also need to depreciate. 

If you are renting out an investment property, you are able to deduct the depreciation in the value of your building and its interior fixtures and fittings against your yearly tax obligations. Combined with the negative gearing of mortgage repayments and the costs of your rental property's upkeep, it can save you thousands of dollars every year. 

What you can claim:

For properties built after July 1985, you are able to claim against its "capital works": the bricks and mortar, doors and locks, fitted kitchen and bathrooms. Regardless of your property's age, you can also claim for "plant and equipment" - that's the suff inside, such as the cooker, dishwasher, carpets, aircon, hot water tank etc. If you have an older home, you can still claim any renovations to the building that you have done. For a rental property, capital works deducations run at 2.5% per annum, usually spread over 40 years. 

Plant and equipment rates are a more fickle beats, and differ depending on the item on which you are claiming. Also, last year, the government introduced new rules about claiming on the "second-hand" chattels that come with a house purchase, meaning they are no longer deductible. As an investor, you can only claim on brand-new products that you have bought for your property. The complexity of the rules means it is essential to employ the services of a tax accountant, who will be able to maximise your deductions and keep you in the Australian Taxation Office's good books. 

Who to employ:

While a Google search will come up with a swag of online calculators that will give you a rough idea of the tax savings to be made on your property's capital works, a depreciation schedule is not somethin that you can cover with a DIY approach. 

The ATO stipulates that only a properly qualified quantity surveyor can give a correct estimate of the construction costs of your property. Thankfully, the fees involved do not need to be high: prices range from a budget $250,to upwards of $1,500 for a fully comprehensive survey. It is up to you how much you want to spend, but remember that the cost of the report is likely to pay for itself many times over, as the report is valid, year on year, until you make any major renovations or repairs. You will also be able to claim your surveyor's fee as a tax deduction. 

When to order your survey:

A depreciation schedule will have a positive effect on your finances, so you need to start thinking about arranging one when you first explore your mortage options. Your trusted broker can help. They work with a team of industry experts, and will be able to recommend the right professional to conduct your survey. Get one done straight after your settlement date before any tenants move in and, come the end of the tax year, you will have a new appreciation for depreciation. 

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Contact Details

Zippy Finance 

PO Box 3078
North Turramurra
NSW 2074

T 1300 855 022 

Louisa Sanghera is a credit representative (437236) of BLSSA Pty Ltd ACN 117 651 760.  Australian Credit Licence 391237. ABN 85 168 278 975.

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