Hello everyone first post from me.
10 mths ago i purchased my first property
(apptmt in Vic Pk WA.) Have done a few reno’s since and am now looking to consolidate my pers loan and credit cards in a refinance move.I live in the apptment with a tennant who is looking to remain here permanently when i decide to move on. To what extent can i claim expenses on this and therefore -ve gear the property.
Specifically the air-con i just had installed. Everyone talks about depreciation but the labor cost approx $500 on top of the unit itself. Does the labor become a straight deduction with the unit a depreciating asset over time?
Monyet…
peter.sand(at)telstra.comI am no accountant (so why am I answering this?), but would think that any expenses currently incurred may be able to be claimed at 50% of cost (as you have a tenant), or it may be better not to claim at all as you may lose your PPOR CGT exemption. But once you move out, then any expense incurred would be 100% deductible.
The air-con would be a depreciatable item, so only the value would be claimable. The labour may be able to be claim against CGT if you ever sell. maybe?
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
As Terry (sort of) suggested, you definitely need to talk to your accountant. I have heard that you can claim everything and not lose the CGT exemption (similar to the 6 year rule), but I couldn’t quote you any legislation, so the best one to ask is the qualified one.
Cheers
MelThanks for the feedback…
How do the ATO then determine PPOR then???
Sorry for the ignorance here but i am looking to claim the apptmt wholly as a tax deduction and this 6 year rule will work greatly in my favor. Do the bills still have to be in my name, adress at the ATO remain there or if i buy no more property for the period does this one just default as my PPOR?
Monyet
i had a friend who had a 4 bedroom house and for a few years he rented the 3 spare rooms at $100 p/wk, he later found out taLKING TO HIS ACCOUNTANT HE WOULD’VE BEEN BETTER OFF ‘DECLARING’ THIS INCOME (oops ‘hit caps lock )[:0)] Anyway, he would’ve been able to claim 3/4’s of interest on the house loan yada yada, but realise this ‘does’ affect your PPOR when you sell ( CGT to some extent applies i believe)
agree with terryw re the 50%, but also… talk to your accountant and plan ahead for your 2003-04 tax return [
]REDWING
Cheers for that redwing..
I have done the sum’s and by simply deducting 1/2 the interest off the rent i am claiming have -ve cash flow and after expenses should have a healthy sum to claim back. Makes me want to move out and claim it all….
As Terry (sort of) suggested, you definitely need to talk to your accountant. I have heard that you can claim everything and not lose the CGT exemption (similar to the 6 year rule), but I couldn’t quote you any legislation, so the best one to ask is the qualified one.Cheers
MelWhat is the 6 year rule Mel?
Regards Bear
Bear
The six year rule is that you can move out of your PPOR and rent it out and if you sell within 6 years of last living in it, and if you have no other PPOR, then it will be CGT free.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
AHHHHHHHH ok, thanks terry , thats useful info [
]Regards Bear
for further info on the 6 year rule see:
http://law.ato.gov.au/pdf/td95-009.pdfand
INCOME TAX ASSESSMENT ACT 1997- SECT 118.145
http://www.austlii.edu.au/cgi-bin/disp.pl/au/legis/cth/consol%5fact/itaa1997240/s118.145.html?query=%7e+dwelling+that+was+sect+118+145Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi,
Generally speaking, the cost of the asset includes anything related to its purchase plus costs associated getting it into a location and condition for use.
As such labour associated with hooking up an airconditioner in a rental property would need to be added to the purchase price and depreciated.
Nb: You can claim a deduction for expenses incurred in the generation of taxable income, to the extent theat the costs do not relate to priate or domestic activities.
Merry Xmas,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Good to see “Steve” popping up on the site again : )
TerryW
The six year rule is that you can move out of your PPOR and rent it out and if you sell within 6 years of last living in it, and if you have no other PPOR, then it will be CGT free.
This may sound ‘silly’ but if you move out and you have no other PPOR ‘where’ are you living [?]
MERRY CHRISTMAS & A ‘GREAT’ NEW YEAR
REDWING
“The man that thinks at 5o as he did when he was 20 has wasted 30 years of his life”
Hence my dilemma….
I can state that i am no longer living here while remaining the entire time which makes a huge difference when -ve gearing.
(able to claim all expenses instead of half)In which case who will know any different?
The ATO has many different ways to determine a persons PPOR but to take advantage of the 6 year rule my address would remain the same with the ATO.Who’s to say whether i am living here or not. A friend told me to set up a PO Box and none would be the wiser.
From what i read as long as i declare rent that would be termed “reasonable” for the IP no-one would be the wiser whether i am receiving this figure or not.
Seems to be a very easy way to get away with being very dodgy!
Thought all along that’s what you were getting at..[}
]I’ve met people who have done it.. but
Remember “Fraud” is a Federal Offence []
So take care..REDWING
Redwing
I appreciate your honesty.
I have to say it is a very attractive option.
My family is all over east and i intend on moving back soon anyway so its actually not really the master plan to commit fraud the 6 year rule becoming a real + for me. Working out depriciation is the difficult task ahead. And also trying to find someone to install the split system air con unit i have bought obviously at the wrong time of year because all the installers are booked up for at least a month..[
][]Redwing,
Perhaps I can illustrate it with an example.
When I was in the ADF I bought my first home back in 1988. 18 months later I was posted to Brisbane and lived in service accomodation.
I rented this property for four years until I decided to sell and buy another PPOR. I did not have to pay CGT.
This is what the CGT exemption is designed for.
Cheers,
Simon Macks
Mortgage Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Good example Mortgage Hunter.
And many people like to use the strategy, buy move in and then move out and rent an equivilent property. It would be cheaper to rent, and you would also gain the benefits of negative gearing without paying CGT.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
You could also purchase another property. It is only on selling either that you would need to determine which had been your PPOR at the time the two overlapped. BUT, you would lose the CGT exemption on the other one for that time.
I’ve seen it somewhere that as soon as you move out, you should get a valuation done on the property. This then will set the ‘value’ for CGT purposes if it then becomes subject to CGT.
Cheers
MelDon’t forget that under Section 118-140 of the Income Tax Assessment Act, you can have 2 main residences for a period of up to 6 months.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terry,
Just to add that that 6 month overlap is for while you are selling the first PPOR. You can’t just overlap it without the sale happening within the 6 months!
Cheers,
Simon Macks
Mortgage Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
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