Q How do I know when I should sell my existing property and put the money into new builds instead? I am worried about the new tax rules.

A I cannot tell you when you should sell your existing property, because whether or not you should sell it and when you should do so depends on a host of factors.

For example, before selling a property you will want to understand what the tax consequences are. Is the property still within its bright-line period? Additionally, even if the interest in relation to the property is not deductible (or subject to reduced deductibility), are there other reasons for retaining the property, such as development potential?

Finally, there is the possibility of a change in government next year and interest becoming deductible again to consider.

Putting money into new builds makes sense at present from a tax point of view because the interest is deductible and the bright-line period is shorter, but the fundamentals still have to stack up. Are you getting equity on purchase? Is the yield acceptable? Are there solid capital growth prospects? In short, you cannot let tax be the sole driver of your decisions in relation to property. By all means take it into account, but don’t lose sight of the broader commercial considerations. -Matthew Gilligan

Q I recently advertised my rental property as being available for $550 a week. Maybe I was a bit light on the rent because I got a lot of enquires. I like to rent my property for less than it’s worth so I get good tenants.

One tenant has offered to pay me more rent than I had it advertised for. I think they will be good tenants, but I don’t know if I’m allowed to take more rent than I had it advertised for?

A Since February 2021, rental properties must be advertised with a rental price and landlords cannot invite or encourage tenants to “bid” on rentals. In the case you have outlined it sounds like there has been no “bidding” as such.

Simply, one potential tenant has indicated they are prepared to pay more for the rental property than the price you had it listed at in order to improve their chance of securing the property. This is acceptable and you can accept their offer to pay more if you are happy to offer them the tenancy. - Ryan Weir

Q I have heard you can turn your garage into another dwelling and get deductibility on your interest under the new tax rules. What’s the deal around this?

A The definition of a new build includes the splitting of one dwelling into two dwellings or the creation of a new dwelling on a site even if that dwelling is a secondhand building.

The essence is that a new dwelling is created, remembering the thrust of the concession is that the government is trying to incentivise the creation of new dwellings.

The conversion of a garage into a dwelling may qualify for this if it is consented and converted properly. Deductibility will still need to be apportioned across the new dwelling and the existing dwelling. - Mark Withers

New builds aren’t necessarily the creation of a new dwelling – they can be achieved by splitting one home into two.

Q Would it be better to use fixed or floating interest rates for a new mortgage as interest rates may go up again when the Reserve Bank next raises the OCR?

A Floating rates are more or less indexed to the OCR (i.e. they move up and down with the OCR). Fixed rates can be different as part of the future expectation of increases has already been built in.

With what the Reserve Bank has stated in regard to their OCR predictions floating rates are likely to be significantly higher next year than fixed-rate options and we are seeing the rate curve likely to go negative, which is a situation where the longer term rates will be cheaper than short term.

This is where borrowers need to be careful as it is easiest at that time to think taking the cheapest money on offer is the way to go, but this is the stage where borrowers are more likely to be better placed by rolling shorter term rates on the expectation of eventual rate decreases. - Kris Pedersen

‘Putting money into new builds makes sense at present … but the fundamentals still have to stack up.’ MATTHEW GILLIGAN

Q I am subdividing my urban property and the sewerage easement will be on the neighbour’s property. Do I need to do anything about this, or could there be any issues?

A Your neighbour isn’t obligated to grant you a new sewage easement, and may be reluctant to do so if this will lead to intensification next door. In the first instance you can check to see if there is an existing easement already in place, or if it’s possible to have the new sewage connection run through an alternative location. If an easement over your neighbour’s property is the only path forward then you will face issues if they refuse to grant this. We recommend front footing this by asking your neighbour if they are happy to grant an easement. An easement agreement can then be drafted and signed where your neighbour unconditionally contracts to
grant you a sewage easement, perhaps in return for you agreeing to meet their legal costs. Every situation is different so you should be diligent about talking to
your lawyer and surveyor about your different options. - Shane Campbell