My wife and I are in the process of building our first home. We did intend to live in the house when its built for the 6 months and then move out and turn it into an IP. I have been reading the forum for a few months now and people seem to think its better to buy an IP first and keep renting. Obviously if this is an IP straight away we will lose the FHOG but will the tax benefits be better? Can we get the FHOG at a later date if we don’t use it now?
Also what exactly can I claim tax on? If the house is going to be an IP straight away can I claim any of the construction costs or the mortgage payments that we are already paying?
Here’s our figures,
Purchase price $460K
Loan amount $370K P&I.I earn $75K a year and my wife earns $40K.
I happy to post other details if needed.
Could anyone suggest whether its better to keep renting and have this as a IP or use the FHOG and live in it?
Thanks
LouieHi Louie
Don't forget the CGT issues.
At least if you live in the property initially for a short time you can claim it as your main residence and possible be able to claim CGT exemption even if you rent it out. Plus you can get the FHOG grant and stamp duty exemptions.
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
If you buy an IP first, you will be ineligible for the FHOG later, as you will have already bought one house.
If it is an IP straightaway, you should be able to claim any cost associated with the IP, but check with you accountant (who should specialise in tax stuff with IP's) and see what they say.
You will really have to crunch all the numbers to see which way will be more worthwhile. Good luck with that !!!!
Kelly
Hi Louie I would contact the office of state revenue your state, you will find the links on our site here http://www.alphamortgagesolutions.com.au/Tools.htm as you have not lived in the place as yet , you may just get away with it so it is worth checking with them. Of course if you have claimed it that may complicate it even further, but a phone call is worth your while.
If they do agree to let you just change it to the investment you should be able to claim the Fhog at a later time when you buy a first home owner property.
Hi, 6 months pass very quickly. You might not have to give up the grant. If I were you, I'd check these issues:
1) The date of ownership can backdate to the day building begins. You can consider that it's PPOR from that date esp if you can't claim tax deductions on expenses.
2) 6 months pass very quickly!
3) You won't need to pay CGT when you move back in after some years of rental.
4) Depreciation offsets will be very useful. [Can be a few thousand a year. I know someone who got $12K one year – it's an expensive apartment]
5) The SIX YEAR RULE may apply in your case. Check it out.Good luck,
Kum YinWith all of the advice above can i ask why you have it set up as a P & I loan and not interest only.
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We have it set up as P&I as we initially thought it would be our PPOR and our broker told us this was the best way to go.
If we had it straight away as an IP and moved in within the 6 year rule would we still need to pay CGT if we sold it?
Louie
kum yin lau wrote:Hi, 6 months pass very quickly. You might not have to give up the grant. If I were you, I'd check these issues:
1) The date of ownership can backdate to the day building begins. You can consider that it's PPOR from that date esp if you can't claim tax deductions on expenses.
2) 6 months pass very quickly!
3) You won't need to pay CGT when you move back in after some years of rental.
4) Depreciation offsets will be very useful. [Can be a few thousand a year. I know someone who got $12K one year – it's an expensive apartment]
5) The SIX YEAR RULE may apply in your case. Check it out.Good luck,
Kum YinHi Kum Yin Lau,
I am interested in number 1. Are you saying that I can claim it as my PPOR as soon as construction begins? So if it takes 5 months to build I will only need to move in for a month and then move out again and then turn it into an IP?
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