HI All
just a quick one. I will be renting out my PPOR shortly and renting elsewhere. As i understand it, the rental income i will be getting just gets added on to my personal income, and taxed accordingly. It seems that this will push me into a higher tax bracket…which gives me the sh#ts!
just wondering if anyone has any advice/suggestions regarding this matter.
Cheers!
Lyndon
It is added but only after you subtract all costs. Inc interest, rates, insurance etc.
If you own the PPOR outright then you will pay a lot of tax on the income.
The way around it might be to borrow to buy another income producing asset? Something that will make a loss but be very likely to make a capital gain.
Myself – I don't mind paying tax. I wish my annual tax bill was in the millions…
Morning Lyndon,
If you are currently still owing on your PPoR you may consider talking to your accountant about the ever popular "6 year rule". As of yet though, I don't know of anyone who has put this rule into practice, however I haven't been searching.
It basically states that you can rent out your PPoR for a period up to 6 years, and provided you move back in, have the property remain vacant after 6 years, or sell, you will not be liable for CGT upon sale. The 6 years renews if you choose to move back out again. You basically convert your PPoR into an IP for the rented period.
So depending on the loan amount and the interest on it, the rent you receive may be offset by the interest incurred.
Also I agree with Simon. Paying income tax is a good thing to complain about . Far better than starving and sleeping out in the cold. Doesn't mean you should grow complacent though
Thanks for the responses so far!
"The way around it might be to borrow to buy another income producing asset? Something that will make a loss but be very likely to make a capital gain."
in regard to the above… im not sure if i would have the cashflow for this. Can you please elaborate further on this though?
Cheers,
Lyndon
Don't forget to also get a depreciation schedule done for the PPoR that has recently become an I.P. This will help substantially with the tax deductions and improve the cashflow – may even turn your tax bill into a refund.
Cream on the cake.
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