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  • Profile photo of bwiemersbwiemers
    Participant
    @bwiemers
    Join Date: 2003
    Post Count: 18

    Hi everybody,

    I have a property (principle Place of Residence)that I’ve owned for 9 years and due to personal circumstances looks like I may have to sell it. [baaa]

    However, I am exploring the idea of turning this property into an investment property. But I’m unsure if I would be able to claim any deductions on Tax, or whether the tax office would treat it differently to a normal rental property.

    The property itself would be cashflow positive, and thats why I thought it may be a good opportunity to start my journey in real estate investing.

    Any contructive advise would be gratefully appreciated. [blush2]

    Regards

    Bernie

    Profile photo of DerekDerek
    Member
    @derek
    Join Date: 2004
    Post Count: 3,544

    Hi Bernie,

    The situation you describe is often described as being how people ‘accidentally’ start out as property investors.

    Your PPOR will remain CGT free for a further 6 years provided you do not buy/build another PPOR so there is no need to hurry and sell your property. If you do hang onto the property for more than an additional 6 years then any gains will be apportioned over the length of time you own the property.

    You will also be pleased to know that all expenses associated with the property will become tax deductible; loan interest (not repayments in the case of P & I loan), water & city rates, building/contents/landlords insurance, property management fees, repairs (as distinct from upgrades) and so on.

    Ultimately whether or not you retain this property will be determined by your short and long term goals and financial situation.

    Derek
    [email protected]

    Property Investment Support Available. Ongoing and never stopping. PM welcome.

    Profile photo of arborphilearborphile
    Participant
    @arborphile
    Join Date: 2004
    Post Count: 11

    Derek
    Just a question on your response above.

    You say that repayments on a P&I loan are not tax deductible. Can you claim the interest component as a deduction?

    Arb

    “I am not young enough to know everything” – Oscar Wilde

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Arb

    Interest on the current debt should be deductible. If a PI loan then the interest component would be deductible.

    But if you were to increase the loan, then this would only be claimable if the money was used for business purposes.

    Terryw
    Discover Home Loans
    North Sydney
    [email protected]

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of DerekDerek
    Member
    @derek
    Join Date: 2004
    Post Count: 3,544
    Originally posted by arborphile:

    You say that repayments on a P&I loan are not tax deductible. Can you claim the interest component as a deduction?

    Hi Arb,

    Only the interest component of a loan is a deductible expense.

    As such if you make repayments of $1000/month of which $800 is the interest component then you are only entitled to claim the $800 as a deductible expense.

    Derek
    [email protected]

    Property Investment Support Available. Ongoing and never stopping. PM welcome.

    Profile photo of bwiemersbwiemers
    Participant
    @bwiemers
    Join Date: 2003
    Post Count: 18

    Hi guys,

    Thanks for your responses and help. I really appreciate it. [biggrin]

    Derek, thanks for your response, it helped me to clarify the situation a bit more.

    I’ll definately look into this further.

    Regards
    Bernie

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