Cashing out of property for franked dividend shares

Scenario,
450k net proceeds before CGT, assume sacrifice the cash to smsf relating to cgt therefore $340k into doc paying shares outside of super and an additional $110k in sms component essentially reducing tax to nil,
Assume can get shares that return -12% after franking. Reinvest dividends received back to more dividend paying shares. Property has yearly $16k yearly depreciation and rents well to cover mortgage.

Assume 15- 20 years to semi retirement.

Any arguments for not selling in lieu of compounding franking credits that will snowball to $200k franked dividends on retirement?

assume have other properties or a PPOR and one in super after still held.

 

I think it will be goodbye to franked credits coming budget - Albo will do it this budget and hope people will forget before next election [2 years away] ... Beware

 

Hard to know what they will attack. Can say the same for negative gearing removal without grandfathering.

 

Reading few articles on possible changes to Capital Gains Tax discount.

I would say over the next few weeks there would certainly be some leaks regarding any major tax changes.

Cheers,
Oracle.

 

Damn I hope you’re not right on this one Oracle!

 

I'd say negative gearing is more on the agenda than anything else.

 

Going to get extra costly with all those IR rises!

 

Sure NG costs has gone up. But remember rents have gone up over 10% to offset NG. Banks net interest margins improved resulting in more corporate tax revenue and last but not the least income from interest (term deposits, high savings account etc) would result in more tax being paid.

So it's not all bad news but I am sure the media will only report on NG costs and won't say a word on the other additional tax revenue due to higher interest rates.

Cheers,
Oracle.

 

I like negative gearing mixed with fully franked dividends. What a combination. You can call it the Albo Combo lol

Look what happened to Shorten. I don’t think Albo will tinker with franking creds, neg gear or CGT discount etc

 

but why sell? just let the property compounding... or just borrow more to buy better assett? 15 years seems like long time...

 

Have modelled both and seems to be comparative assuming that property continues to compound. Reinvesting div paying shares is a guaranteed compound. However scenario could be different if property stagnates even if in NSW and has happened in the past. Also easier to swap shares as very liquid and less sunken/sell costs.

 

Shares dont always return 12% a year either tho……

 

On what basis is your position? I’ve already found shares that have high div stability that return 12-15% after franking credits which would be more guaranteed than property prices going up yearly.

 

Modification rather than elimination? Ring fencing of negative gearing which would actually make sense, franking credits remain but the removal of franking credit refunds - maybe.

 

With all the new problems that will hit the IP market, most of these people will be heading for the hills in a few years time. Some of them will learn the hard way.

 

What about all the businesses now paying extra interest though? That would decrease tax revenue

 

We all have our opinions. The point is, your model is only as good as the assumptions about returns of each asset class.

 

Fingers crossed you are a good stock selector to get that consistently, especially at the high end.

 

Is that counting the dividends it has paid out in top of capital growth?

 

As per the explanation above the table. Income re-invested.