Author Archive
Tax Newsletter – June 2015
May 13, 2015 | 
Author Commissioner’s statutory remedial power on the way
Even though the Commissioner of Taxation endeavours to interpret the law to give effect to its purpose or object, there are instances where this is not possible. To address this, the Government has announced that it will provide the Commissioner with a statutory remedial power to allow for a more timely resolution of certain unforeseen or unintended outcomes in taxation and superannuation law.
In announcing the Government’s plan, the Assistant Treasurer Josh Frydenberg said the power will be appropriately limited in its application and will apply to the extent that it has a beneficial outcome for taxpayers. It will only be available where the modification is not inconsistent with the purpose or object of the law and has no more than a negligible revenue impact. The Commissioner will consult publicly prior to any exercise of the power.
ATO ramps up face-to-face contact with wealthy individuals
The ATO has released details of its new approach to wealthy individuals and their private groups. The ATO is focusing on a “prevention-before-correction” approach and is ramping up its face-to-face interaction with key taxpayers.
According to the ATO, about 30% of wealthy individuals and their private groups are considered “high risk”. Acting Second Commissioner Michael Cranston said that if taxpayers are open and transparent with the ATO, they can expect better services and faster turnaround of key decisions.
Mr Cranston also noted the ATO “will sign-off on the previous year’s tax returns of taxpayers who have been open and transparent” about their affairs, have good compliance records and are considered low-risk. He said this will provide certainty for about 30,000 privately owned and wealthy groups that they will not be subject to an audit for specific income years.
TIP: Some of the risk areas that attract the ATO’s attention include individuals with unreported foreign income or assets; certain types of remuneration arrangements used by members of professional firms; the egregious use of trusts; and mixing personal and company expenditure.
Sale of business earn-out arrangements – tax changes on the way
The Government is looking to provide clarity in relation to the capital gains tax (CGT) treatment of earn-out arrangements in connection with a sale or purchase of a business.
An earn-out arrangement is an arrangement whereby, as part of the sale of a business, the buyer and seller agree that subsequent financial benefits may be provided based on the future performance of the business. For example, two parties are negotiating the sale of the business where a significant part of the value of the business is tied to its customer base – that is its goodwill. There is considerable uncertainty about how the sale and other factors may impact upon this goodwill. The parties could agree to an earn-out arrangement under which part of the consideration for the sale is linked to the future economic performance of the business.
The proposed rules aim to provide “look-through” CGT treatment to earn-out arrangements. That is, under the changes, taxpayers may disregard capital gains or losses that arise in relation to the qualifying right to financial benefits. Instead, taxpayers must include financial benefits provided or received under or in relation to such rights in determining the capital proceeds of the disposal of the underlying asset (for the seller) or the cost base and reduced cost base of the underlying asset for the buyer.
It is proposed that the changes would apply from the exposure draft legislation release date (ie 23 April 2015).
ATO data-matching eBay sellers
The ATO is collecting data from eBay Australia & New Zealand Pty Ltd of sellers who had sold more than $10,000 worth of goods and services on the eBay online trading website during the 2013–2014 financial year.
The ATO said the data will be electronically matched with its records to identify possible non-compliance with the tax law.
The data-matching program is designed to enable the ATO to address the compliance behaviour of individuals and businesses selling goods and services via the online-selling site who may not be correctly meeting their taxation obligations, particularly those with undeclared income and incorrect lodgment and reporting for GST.
It is expected that records relating to between 15,000 and 25,000 individuals will be matched.
TIP: If you sell products or services online, you need to understand whether you are doing it as a hobby or carrying on a business. The ATO said the ongoing collection of online-selling data enables it to review online sellers who are transitioning from hobby status to potentially being “in business”. When selling online becomes a business, the income you earn from it is subject to tax. If this is the case, you may also be eligible for tax deductions.
Aggressive R&D claims under scrutiny
The ATO and AusIndustry are working closely with each other to identify taxpayers who may be involved in aggressive research and development (R&D) arrangements. In particular, the ATO and AusIndustry are seeking arrangements that are inconsistent with the requirements of the law, may have features of tax avoidance, and may be fraudulent.
In this regard, the ATO and AusIndustry have asked taxpayers to ensure that their claims for R&D expenditure are attributed to activities that are consistent with their AusIndustry registration – and, importantly, that expenses (eg labour costs) were actually incurred on R&D activities.
TIP: Companies should consider whether they have undertaken research and development (R&D) activities that may be eligible for the Government’s R&D Tax Incentive. Eligible R&D activities are experimental activities that are conducted in a scientific way for the purpose of generating new knowledge or information. To potentially claim the R&D Tax Incentive, the company’s R&D activities need to be registered with AusIndustry within 10 months of the end of the income year. Companies are required to maintain records to demonstrate, not only to AusIndustry, but also to the ATO, that the activities carried out are eligible R&D activities and that they incurred expenditure related to the activities.
No jab, no pay for child benefits – Government immunisation requirement
The Government will end the conscientious objector exemption on children’s vaccination for access to taxpayer-funded Child Care Benefits, the Child Care Rebate and the Family Tax Benefit Part A end-of-year supplement from 1 January 2016.
Immunisation requirements for the payment of the FTB Part A end-of-year supplement will also be extended to include children of all ages. Currently, vaccination status is only checked at 1, 2 and 5 years of age. The Government will also end the exemption on religious grounds, leaving only the existing exemption on medical grounds.
Posted in 
Property Newsletter – May 2015
An opportune time to review your mortgage
Even if your circumstances haven’t changed, now is a great time to review your mortgage to ensure you’re receiving the best deal – what do you have to lose?
Reviewing your mortgage could save you thousands of dollars and help you to reach your goals sooner, but many property investors simply don’t reassess their loans as often as they should.
Too many investors treat their mortgages as ‘set and forget’ and only consider a review if their circumstances are about to change, such as refinancing for another property purchase, for instance.
Reviewing your mortgage will ensure your loan products are still the best on the market that are most suited to your circumstances.
Changes to your personal circumstances, such as a new job, a promotion or the arrival of new children, can affect your financial position, and may mean your existing loan structure is no longer the best suited for you.
Even if your circumstances haven’t changed, there may be new products that could save you thousands of dollars.
With record-low interest rates and healthy competition among lenders, now is an opportune time review your mortgage.
It is a simple process that can deliver huge financial gains, unlock equity in your existing portfolio and help to purchase your next investment property.
If you’re interested in reviewing your loans, please contact a Momentum Wealth mortgage broking specialist today on 08 9221 6399.
2 common pitfalls of property investment
Property investment is a great way to significantly grow your wealth, however there are many common mistakes that investors continually make.
While property investors generally focus on the features and requirements needed to become successful, many often forget to consider the aspects and strategies that should be avoided.
Here are two common pitfalls of property investment that investors should generally avoid.
- Taking advice from the wrong people
Selling agents and property spruikers are usually working in the best interests of the seller or developer, not working in your interest as a property investor. No matter how helpful these people may seem, they don’t work for you. Selling agents work for the seller and are legally obliged to act in the best interests of their client. Developers, on the other hand, are interested in selling their stock and making profits – they aren’t usually motivated to sell you a great investment property that will experience strong capital growth. Similarly, property spruikers generally make their money by receiving commissions from developers or selling agents. Some property spruikers also just want to make a quick buck and provide ill-informed advice or sell you sub-standard investment properties.
- Following the herd
Property investors all too often follow the herd. When the property market is hot, many investors will make irrational decisions fearing that they will miss out on capital growth. On the other hand, when the market slows, many investors will defer investment decisions until the next upcycle. To build your wealth through property investment, you need to remain focused on your goals. You shouldn’t purchase your next property simply because the market is hot. You need to consider how this fits in with your broader investment plan. Similarly, you shouldn’t shy away from a cool market. Generally, there are many benefits of buying in a soft market including increased housing stock, less competition, more bang for your buck and more power in contract negotiations. Buying in a soft market helps ensure you don’t miss the next upcycle.
Location and large blocks provide appeal
This established riverside suburb is just a stone’s throw from Perth city and still offers large residential blocks at reasonable prices.
Bayswater has a population of 13,500 residents with a median age of 38 years. The suburb covers 10 square kilometres and essentially comprises three areas – east of Tonkin Highway, western riverside and the western inland side.
The suburb is located just 6 kilometres from the Perth central business district and has access to three strain stations – Bayswater, Meltham and Ashfield.
The area is also serviced by buses down the urban corridor including Guildford Road, which connects to East Perth.
Bayswater is also split by Tonkin Highway, providing further access to the north and south, including the airport, Great Eastern Highway and Roe Highway.
There is little state housing in Bayswater and one of the suburb’s biggest drawcards is its river frontage, which totals about 3 kilometres.
Infrastructure in Bayswater is also well established, which provides excellent access to a number of valued services and employment centres including Morley Galleria, Bayswater industrial zone and Perth CBD.
With more than 78% of dwellings in Bayswater listed as houses, the suburb provides good investment opportunities for larger, low density blocks. These will be particularly sought after as Perth’s population continues to grow and its surrounding suburbs increase in density.
Some high density dwellings already exist in the suburb, primarily around Bayswater local centre and Bayswater Train Station.
About 30% of the dwellings in the suburb are leased, as well, which is about average for suburbs in Perth’s metropolitan area.
With an average median dwelling price of just over $600,000, Bayswater sits slightly above the broader Perth median price.
School facilities for Bayswater include Durham Senior High School and Bayswater Primary School.
Should I lease my property as a share house?
The thought of a share house immediately invokes images of neglectful and problematic tenants, so is it ever a good idea to pursue?
Share houses are usually the domain of university students or young professionals that might not be ready, financially or otherwise, to purchase their own home, and are prepared to rent out a property on a room by room basis.
There can be specific suburbs or locations that may be suitable for share houses.
In the case of university students, for example, properties located near a university campus and in an affordable area are typically sought after.
Young professionals, on the other hand, might be willing to pay a little bit extra and therefore demand a more modern property that is in a better area but close to transport links.
The benefit of leasing your property as a share house is that you can receive higher rental returns as tenants in share houses may be willing to pay slightly higher rents.
Higher rents are not guaranteed, though, and leasing your property as a share house usually presents more disadvantages than benefits.
A share house, for example, is inclined to experience more wear and tear because there is generally higher foot traffic.
This means you may have to replace carpets, window treatments and fixtures and fittings more often.
When leasing to university students, you may also face a higher turnover of tenants and longer vacancy period. This is because students may only want to lease a property during the university semester, which could leave you without a tenant over the summer holidays.
Share houses may also attract neglectful tenants that don’t maintain or care for the property as well as older tenants or a young family. If it’s the first time they have lived out of the family home, university students and young professionals may not be aware of the level of upkeep required to maintain the property to an acceptable standard.
Also, if you are renting the property out on a room-by-room basis, there may be disputes as to who is responsible for any damages to common areas, such as kitchens and bathrooms.
Generally, while the extra cash flow looks appealing on the surface, for the vast majority of investment properties it makes more sense to rent the whole premises to a family or group who are all on the lease and responsible for the whole property.
DAP threshold changes take effect
Proposed changes that allow more property developers to bypass local councils and apply to an independent panel for building approvals have taken effect this month.
The reforms have widened the threshold in which developers can choose to bypass Local Government Authorities (LGAs) and submit buildings applications to Western Australia’s Development Assessment Panel (DAP).
Property developers can now choose to have their building applications, valued between $2 million and $10 million, determined by the DAP. The previous range was for projects valued between $3 million and $7 million.
The revised regulations, which took effect on May 1, apply to all property developments in Western Australia, excluding the City of Perth local council where the upper limit is $20 million.
The DAP is responsible for assessing all projects that are valued above the upper thresholds.
The reforms were flagged in the January edition of Momentum Wealth’s Property Wealth News after the WA state government revealed it was seeking to make the changes sometime in 2015.
The DAP was established in 2011 and was formed to provide better decision-making outcomes for development applications.
The changes to thresholds are expected to create a more flexible system for property developers and allow them to choose whether their applications are determined by the DAP or relevant LGA.
Success Story: Investor reaps higher yields with distinct strategy
How does a rental yield of more than 10% sound? This Momentum Wealth client said he was “shocked” following such strong demand for his Perth property.
Last year Momentum Wealth client Adam Bishop decided to take advantage of what’s known as a dual-income strategy, and the decision has paid off.
At the time, the fly-in fly-out worker wanted to purchase another investment property to grow his portfolio but didn’t have enough borrowing capacity.
Instead, he decided to build an ancillary dwelling on the back of his existing investment property, which would cost a fraction of the price.
Recent changes to planning and development legislation in Western Australia mean ancillary dwellings, more affectionately known as granny flats, can now be leased separate to the main residence.
By building an ancillary dwelling, you’ll receive two rental incomes from one investment property, hence the name dual-income strategy.
After engaging Momentum Wealth’s planning and developments division, a two bedroom, one bathroom ancillary dwelling was designed that would fit in with the existing investment property, located in Forrestfield.
Following the recent completion of the ancillary dwelling, Momentum Wealth’s planning and developments division officially handed the keys to Adam.
The completed turnkey solutions come ready for tenants to move in and include a premium-brand air conditioner, stainless-steel dishwasher, fully painted internally and externally and 2.7 metre (31 course) high and raked ceilings.
When it came time to leasing the ancillary dwelling, Momentum Wealth’s property management team received very strong demand.
In the first and only viewing, fifteen groups attended the home open and seven applications were received.
“I was shocked that it had such a big turnout and the applicants were quite diverse, so I had a lot to choose from,” Adam said.
After thorough consideration, the ancillary dwelling was leased to a single male for $300 per week, which represents a rental yield of 10.75% on the cost of the ancillary accommodation.
Including the main residence, which is rented for $400 per week, the property’s total rental yield stands at 6.3%.
“It’s definitely a good return,” Adam said. “If I could find the right property I would definitely do it again.”
Finance Newsletter – May 2015
Do you have the most suitable loan for your circumstances?
Do you have the best rate available?
If your interest rate is over 3.99% p.a fixed for 3 yrs then you may be able to save thousands per year by changing loans and or banks. I have access to a bank that is currently offering customers 3.99% fixed for 3 yrs home loans. Conditions apply. Variable rates from 4.34% ( Comparison rate 4.35% ) with no application or monthly / annual fees ever .So if you are interested in saving thousands per year call Mercia finance to see if we can show you how to benefit from a better rate.
If you have questions regarding any type of loan, call Dan Goodridge on 04144 233 40. Our service is free of charge to you the borrower and we have access to all the major lenders in WA.
Tax Newsletter – May 2015
Tax planning
There are many ways in which entities can defer income, maximise deductions and take advantage of other tax planning initiatives to manage their taxable incomes. Taxpayers should be aware that in order to maximise these opportunities, they need to start the year-end tax planning process early. Of course, those undertaking tax planning should be aware of the potential application of anti-avoidance provisions. However, if done correctly, tax planning can provide a number of tax savings for entities.
Deferring assessable income
- Income received in advance of services being provided is, generally, not assessable until the services are provided.
- Taxpayers who provide professional services may consider, in consultation with their clients, rendering accounts after 30 June in order to defer the income.
- A taxpayer is required to calculate the balancing adjustment amount resulting from the disposal of a depreciating asset. If the disposal of an asset will result in assessable income, a taxpayer may want to consider postponing the disposal to the following income year.
- Rollover relief may be available for balancing adjustments arising from an involuntary disposal of assets where replacement assets are acquired.
Maximising deductions
Business taxpayers
- Taxpayers should review all outstanding debts prior to year-end to determine whether there are any potential debtors who will be unable to pay their bills. Once a taxpayer has done everything in their power to seek repayment of the debt, the taxpayer could consider writing off the balance as bad debt.
- The entitlement of corporate tax entities to deductions in respect of prior year losses is subject to certain restrictions. An entity needs to satisfy the continuity of ownership test before deducting the prior year losses. If the continuity of ownership test is failed, the entity may still deduct the loss if it satisfies the same business test.
- A deduction may be available on the disposal of a depreciating asset if a taxpayer stops using it and expects never to use it again. Therefore, asset registers may need to be reviewed for any assets that fit this category.
- Small business entities are entitled to an outright deduction for the taxable purpose proportion of the adjustable value of a depreciating asset, subject to conditions.
Non-business taxpayers
- Non-business taxpayers are entitled to an immediate deduction for assets used predominantly to produce assessable income and that cost $300 or less, subject to conditions.
- The self-employed and other eligible persons are entitled to a deduction for personal superannuation contributions subject to meeting conditions such as the 10% rule.
Companies
- Companies should ensure that all dividends paid to shareholders during the relevant franking period (generally the income year) are franked to the same extent to avoid breaching the benchmark rule.
- Loans, payments and debts forgiven by private companies to their shareholders and associates may give rise to unfranked dividends that are assessable to the shareholders and their associates. Shareholders and entities should consider repaying loans and payments on time or have appropriate loan agreements in place.
- Companies should consider whether they have undertaken eligible research and development (R&D) activities that may be eligible for the R&D tax incentive.
- Companies may want to consider consolidating for tax purposes prior to year-end to reduce compliance costs and take advantage of tax opportunities available as a result of the consolidated group being treated as a single entity for tax purposes.
Trusts
- Taxpayers should review trust deeds to determine how trust income is defined. This may have an impact on the trustee’s tax planning.
- Trustees should consider whether a family trust election (FTE) is required to ensure that any losses or bad debts incurred by the trust will be deductible and to ensure that franking credits will be available to beneficiaries.
- Taxpayers should avoid retaining income in a trust because it may be taxed in the hands of the trustee at the top marginal tax rate.
Capital gains tax
- A taxpayer may consider crystallising any unrealised capital gains and losses to improve their overall tax position for an income year.
- Eligible small business entities can access a range of concessions for a capital gain made on a CGT asset that has been used in a business, provided certain conditions are met.
Superannuation
- Individuals who wish to take advantage of the concessionally taxed superannuation environment but wish to stay under the relevant contributions caps should consider keeping track of contributions and avoid making last-minute contributions that would be allocated to the next financial year.
- For 2014–2015, the general concessional contributions cap is $30,000. For those who are aged 49 or over on 30 June for the previous income year, a higher $35,000 cap applies.
- For 2014–2015, the non-concessional contributions cap is $180,000. Individuals under 65 years may bring forward the non-concessional cap for the next two years (ie $540,000 over three years from 2014–2015).
- From 1 July 2013, excess concessional contributions tax has been abolished. Instead, excess concessional contributions are included in an individual’s assessable income (and subject to an interest charge).
- From 1 July 2013, excess non-concessional contributions tax continues to apply where relevant, unless the option to withdraw excess contributions is exercised. Associated earnings will be included in the individual’s assessable income (subject to a 15% tax offset).
- Individuals with salary-sacrifice superannuation arrangements may want to have early discussions with their employers to help ensure contributions are allocated to the correct financial year.
- From 2012–2013, individuals earning above $300,000 are subject to an additional 15% tax on concessional contributions. However, despite the extra 15% tax, there is still an effective tax concession of 15% (ie the top marginal rate less 30%) on their contributions up to the relevant cap.
Fringe benefits tax
- The four rates used in the statutory formula method for determining the taxable value of car fringe benefits have been replaced with a single statutory rate of 20% for fringe benefits.
- The first $1,000 of the aggregate of the taxable values of “in-house” fringe benefits (ie in-house expense payment, in-house property and in-house residual fringe benefits) provided to an employee during a year is exempt from FBT. However, the $1,000 reduction does not apply to an in-house benefit provided on or after 22 October 2012 under a salary packaging arrangement.
Individuals
- For the 2014–2015 income year, the general tax-free threshold available to Australian resident taxpayers is $18,200.
- Certain low income taxpayers are entitled to the low income offset. The maximum offset for 2014–2015 is $445.
- The medical expenses offset is being phased out and will no longer be available after 2018–2019. Transitional arrangements will allow taxpayers to claim the offset from the 2012–2013 income year until the end of the 2018–2019 income year, subject to limitations.
- The private health insurance offset has been means tested since 1 July 2012. There are three private health insurance incentive tiers.
Property Newsletter – April 2015
Cross collateralisation – what is it and why is it bad?
Cross collateralisation is one of the most common mistakes made by property investors. But what is it and why should it be avoided?
Cross collateralisation is when an investor uses more than one property as security for a loan.
For example, let’s say Jane Doe wants to purchase a $400,000 investment property.
Jane currently has:
- A house worth $600,000
- $200,000 remaining on her mortgage with Lender A
- No deposit or cash
Given the amount of equity in Jane’s house, she can approach her lender (Lender A) and secure the entire $400,000 needed to buy an investment property.
Following the transaction and acquisition, Jane will have $1 million worth of property and $600,000 worth of debt.
What’s more, with an 80% loan-to-value ratio, Jane will also have at least another $200,000 of equity in her properties.
If Jane wants to utilise this equity to purchase another investment property, she can approach Lender A for another loan. However, depending on her circumstances and the lender’s policies at the time, they may reject another loan application from her.
No big deal, right? Jane can always approach another lender?
Actually, it’s not that simple.
In reality, it’s unlikely that Jane would secure a loan from another lender (Lender B) because her original lender (Lender A) would have taken first mortgage security against both her home and her investment property.
Generally, lenders won’t issue second mortgages because they aren’t in control and can’t hold existing property titles as security. Given this, it’s likely Lender B would reject a loan to Jane unless all properties were refinanced to Lender B.
If an investor has purchased several properties using cross collateralisation, their ability to borrow from their lender becomes increasingly harder.
Savvy investors know that it is beneficial to spread their borrowings among different lenders.
In the above example there is a better way to secure all the finance needed for the $400,000 investment property.
What Jane should have done is approached Lender A for a home equity loan of $280,000 – if she has good credit, and she can service the loan, there is no reason why she shouldn’t have this approved.
Using $80,000 of the home equity loan as a deposit, Jane can approach Lender B to loan the remaining $320,000 needed to buy the investment property.
Jane now has $1 million worth of property and two lenders who both only control one of her properties.
She also has $200,000 remaining of her home equity loan, with which she can use to purchase more properties, if desired.
Another major downfall of cross collateralisation occurs if you want to sell one, or more, of your properties.
This is because you are essentially changing the terms of your contract with your lender.
By selling one property you are taking it away from your lender as security and changing your loan-to-value ratio.
Subsequently, your lender may require you to reapply for your loans in order to release the property you want to sell. They can also ask you for revaluations on your remaining properties, which are completed at your cost.
The lender can even take proceeds from the sale of your property, or deem that you no longer meet their lending requirements and force you to sell more properties than you intended.
By choosing not to cross collateralise, you will only ever be required to repay the loan that the property is secured against.
Furthermore, having separate lenders for separate properties will give you more options should you choose to refinance.
Although the idea of cross collateralisation can sound confusing, it’s important to remember to only offer the property you are purchasing as security.
6 reasons why good properties are sold below value
The notion of undervalued property might seem inconceivable – why would anyone sell their most expensive asset for less than its worth? However there are many reasons why people sell property for below market value.
Acquiring a good property for below market value can deliver huge financial windfalls and even help investors buy their next property sooner.
Owner-occupiers and investors, alike, sell property for less than it’s worth for a number of reasons.
Before listing these, though, it is worth noting.
While undervalued properties can be found from time-to-time, in the large majority of cases if the price of a property seems too good to be true, there is generally a reason.
Subsequently, it pays to complete adequate research because the price may have been lowered for a number of reasons, such as delinquent neighbours, structural issues with the house or noise factors, among others.
However, here are six reasons why good properties can be sold for below market value.
- Downsizing: If older owner-occupiers want to downsize, or move into a retirement home, in many cases price won’t be a priority. The owner may prefer a quick sale and therefore advertise the property at a lower price.
- Presentation: In soft markets, when housing stock is high, buyers can be more selective and will generally prefer renovated properties. Savvy investors can purchase older homes that will demand higher prices after minor and cost effective upgrades are completed.
- Divorce: Similar to the downsizing situation, when a couple is separating, the price of the property may not be a priority. Rather the owners may require a quick sale.
- Uninformed selling agents: If an agent isn’t familiar with the suburb they may under-price the property. Additionally, the agent may not be familiar with the particular zoning of the property. For example, a selling agent may advertise the property as a potential duplex development, however planning rules may allow a triplex, or bigger.
- Financial distress: The owners of the property may be under financial pressure. They may have had a bad tenant that hasn’t paid rent or amassed too much personal debt to meet mortgage repayments.
- Difficult tenants: Existing tenants may be difficult and only provide limited access to the property for home opens. This can discourage potential buyers, which means less competition and the chance of a lower price.
It’s certainly more important to buy a property with the best long term growth prospects rather than focussing on the best “deal”, as that initial saving can soon disappear if the property performs poorly. You should always focus on the better long term investment. However in a softer market there are opportunities to get great properties and get a little more off the price.
Shopping centre redevelopment to complete leafy suburb
A $600 million redevelopment of a major shopping centre is set to complete the picture for this family-friendly suburb.
Carine is located about 13 kilometres north west of Perth city and features predominately low-density residential housing, which comprises 90% of dwellings in the suburb.
Carine encompasses about 5 square kilometres in which there are 17 parks that cover nearly a quarter (24%) of its area.
Another major drawcard for Carine is its proximity to the beach, which is positioned less than 1 kilometre from its eastern border.
Its boundary runs along major roads, which makes accessibility easy, including Mitchell Freeway to the east, Beach Road to the north, Marmion Avenue to the west and North Beach Road to the south.
This provides good public transport links with buses down the urban corridors and access to Warwick Train Station.
Carine’s main shopping complex is the Carine Glades Shopping Centre and features an IGA, speciality stores, fast food, butchers and tavern.
The suburb is set to benefit from a proposed expansion of the Karrinyup Shopping Centre, though, which is a short 5 minute drive away.
The shopping centre’s owner has lodged plans for a $600 million expansion after more than a year of negotiations with the City of Stirling.
The redevelopment would include 150 apartments and aim to draw Australian and international retailers and restaurants.
If approved, construction is tipped to start in late 2016 and take 3 years to complete.
The centre would be the third largest shopping complex in the state and bigger than the recently opened Lakeside Joondalup Shopping Centre.
Carine identifies as an upper-class area due to its high median household weekly income ($2,135), high level of ownership (88%) and large number of professional workers in the area (32%).
School facilities include Carine Senior High School, which is highly rated in the state at 90/100 in the 2014 Better Education Guide, and Carine Primary School.
Are furnished properties a good option for landlords?
Offering a furnished property to tenants can demand higher rental yields, but is it worth the extra effort?
In Australia, there are generally five ways a landlord can make their property available for lease.
- Unfurnished – the landlord doesn’t provide any furniture
- White goods – some or all white goods are supplied
- Partly furnished – some lounges or tables and chairs are provided
- Fully furnished – the landlord provides all furniture
- Fully furnished and equipped – all household items are included, from cutlery and kitchen utensils to beds and desks.
The majority of landlords lease properties as unfurnished, or with some white goods included.
This is because if any white goods, furnishings or other included equipment break during the tenancy it is the responsibility of the landlord to replace the item, in most cases.
This can prove to be highly costly, particularly when larger pieces of furniture break, such as washing machines or lounges.
Additionally, landlords are generally required to replace smaller items, such as cutlery and kitchen utensils, in the event that they are broken. For landlords, this can become an ongoing hassle that they have to deal with.
The upside to providing furnishings is that, in most cases, landlords can claim depreciation on the items they have supplied.
Although landlords can demand higher rent with furnished options, this can be offset by tenant turnover, which may lead to longer vacancy periods.
Furnished houses usually attract more transient tenants who need accommodation for short periods (6-12 months), such as students or business people.
Given this, if you are fully furnishing, it’s best that the properties are located close to employment hubs, such as city CBDs or universities.
Equally, the quality of the furniture a landlord provides will also determine the quality of the tenant.
Students might be content with worn couches or furniture from IKEA, but it’s less likely to suit a corporate businessperson.
While providing a furnished option might sound like too much effort, there are instances when it can be beneficial.
For example, take an international business person that needs a fully furnished apartment in the city. Wear and tear on the furnishings is likely to be minimal if the tenant only stays at the apartment every other week when they are in town for business. Furthermore, a tenant such as this is likely to spend more of their time in their office rather than the apartment.
In any event, it’s always best to consult with your property manager when considering a furnished option for your investment property.
Is a development the best option during a building boom?
Residential building approvals in Western Australia hit record highs over the past year, but is it a good time to start your own development?
The number of residential buildings approved for construction in WA reached an average of 2,680 dwellings per month in 2014, according to the Australian Bureau of Statistics.
That is more than 30% higher than the state’s decade average, which stands at 2,043 per month.
There are a numerous factors that have driven the high number of building approvals in WA including record-low interest rates and high population growth.
Another major factor has been the increase in the number of large apartment projects being approved for construction in the Perth central business district (CBD).
However, with such a high amount of activity in the residential construction sector, is it a good time to undertake your own development?
The short answer is yes it is – in the right locations.
There remains opportunities in the Perth market to make a large profit from property development.
However, as is the case in any other economic environment, research is the key to help ensure you mitigate the risks and maximise the profits.
Before you start a development you need to gain a firm understanding of the industry and its intricacies, including how it works and who specialises in what services.
You also need to understand the state of the market – what stage of the growth cycle is the city and selected suburb in? Will the type of development be in demand in that suburb and what price can you receive?
It’s important to spend time researching sites until you have found a project that fits your specifications. Following this, it’s essential to complete a feasibility study to make sure it meets all your requirements and whether you can make an adequate profit.
Once you’ve chosen your site, you’ll have to tactfully acquire it, properly structure your finances and deal with designers and builders.
However, success in property development all starts with comprehensive research and securing the right location.
For example, choosing a development site in Perth’s CBD for a small apartment complex is unlikely to be profitable given the high number of large apartment towers currently planned or under construction.
However, a small, multi-residential development several kilometres from the CBD, but close to a train line, parks and a vibrant activity centre, would typically pose a better investment.
Therefore, undertaking adequate research, completing due diligence and utilising professional services firms where necessary will help to reduce risks and maximise profits for any development project.