Friday, June 16, 2006

Newsletter June 2006


What if your investment property never increased in value?

Even though this is extremely unlikely, it is still worthwhile to ask the question.

If your investment property never increased in value, would it still be a good investment?

Well – the answer is “YES - it would still be a wonderful investment!”

That’s right – it would still be an exceptional and wonderful investment. Let me explain.

Now remember, when you put a negatively geared investment in place, the taxman becomes your friend, and he allows you to redirect your taxes (it’s your money, and you control it) away from its routine Canberra journey and into your own investment property.

Now many of us pay about $20,000 a year in taxes, and over the next decade it is reasonable to assume that we will be paying more as our income increases.

So over the next 15 years, it is fair to assume that you will be paying at least $300,000 in personal income tax – unless you take control of this money and redirect it into your own investment portfolio.

But you can get all that back. In fact, over time you can claw back all of this $300,000 – which is the cost of your first investment property.

So in answer the question “If your property never increased in value, would it still be a good investment?” the answer is YES, YES and YES.

Of course it’s a good investment. It hasn’t cost you anything.


When you put an investment property in place, it is important for couples – at the time when you are completing the paperwork – to mark the ownership 99-1.

This ensures that you receive back 99% of all possible tax benefits, while maintaining complete and absolute security for the 1% party.

However, not all banks will allow a 99-1 structure (their rationale follows from their reluctance to have as guarantor for a loan someone who is not participating in the ownership of the asset).

Some banks will only allow an 80-20 structure.

However when you approach a bank, an outsider – and probably even most bank employees – would not know what the bank’s policy is towards this structure.

But you really don’t want to lose 20% of your tax-back entitlement, do you?

Which is one of the reasons why my private clients keep returning to me to expand their portfolio, and keep referring family, friends and work colleagues to

If you want advice on which banks to avoid, phone me right now. My mobile is 0414 778 518

Warm regards

Bernard Kelly 0414 778 518