If I buy an investment property and rent it out for a year and then move in does anyone know how that effects negative gearing and capital gains tax.
Can I claim the full cost of stamp duty, what happens if you move in after six months ? And if you move in after the first year what are the capital gains implications if it then becomes principle place or residence.
If you are negative gearing, then you will stop negative gearing when you move in. No implications, unless you have a tax variation in place based on a rental for greater than 6 months in the same financila year.
With regards to CGT, when (and if you sell), you will pay CGT (50% if after 12 months) on a prorata basis. For example if you live their for 5 years (60 months), then it would be
Capital Gain – (Stamp Duty) * 0.50*(6/60)
Stamp Duty is claimed back at the time of selling by reducing the cost base of your property.
I am sure someone will correct me if I have missed something here.
James
Hi Sam
If you are in ACT, you can claim stamp duty off your taxable income, but nowhere else in Aust. It is claimed as a ‘capital cost’ as James said.
James, I’m not sure how you came up with your 6/60? I get the 60 months being the time lived in, but if it was rented for 6 months prior, then it would be 6/66? Total ownership period.
Cheers
MelMel
I’m in the ACT, so if I buy an IP which then becomes PPOR after 6 months, you are saying the entire SD is tax-deductible even though we only rent the place out briefly (then live in as PPOR for many years?
dreamergirl
One other thing is that when you rent your ip for say 1 year then I think the CGT is also in that period. which mean you have to pay tax on your 1 year CG.
Kind regards
Chan Dollars
[Retire Young, Retire Rich] [strum]Mel,
You are indeed correct. The brain was thinking one thing and the fingers were typing something else. Should be 66 months.
I wish I could have used the excuse of it being late when I wrote it…Doh!
James
On a closely related subject, what about the situation where you purchase an investment property and it then becomes your PPOR before the end of the first 12 months, is it possible to still be eligible for the FHOG?
I believe so.
Call your relevant state department.
They are listed at:
http://www.mortgagehunter.com.au/first-home-owner-grant.html
Share the answer here!
Cheers,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
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.
Hi dreamergirl
sorry, haven’t been in this forum for a while. Yep, you can claim the stamp duty if you rent it for 6 months, then live in it.
Possibly could claim the FHOG, but I don’t know about that as I have never been eligible, so don’t really know the rules too well.
Cheers
Mel
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