All Topics / Legal & Accounting / Why & How Do Investor Rent their Own Ppty?

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  • Profile photo of icecoolicecool
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    @icecool
    Join Date: 2007
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    Just been thinking how some investing expert said they can rent their own ppty & claim tax deduction having IP in their name? Any sharing & thots will be of interesting to know. thks!

    Profile photo of TerrywTerryw
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    @terryw
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    Yes, you can rent out your home and claim the deductions as you can on a normal investment property and, under s145-118 of the ITAA, still claim a CGT exemption for that house.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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    Profile photo of icecoolicecool
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    @icecool
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    hi terry, thanks for your reply. i apologize for not posting the right question. WHAT i meant is How investor can rent back their own IP to live there themselves & still claim tax deduction legally?? Do they buy it using a Trust or campany? In this situation do they still need to engage an estate agent for the seek of obtaining any paper/document when lodging tax return? What are the steps involves to achieve this situation?

    Profile photo of TerrywTerryw
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    @terryw
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    Hi

    You can't rent your own property, but you could rent one owned by a company or a trust that you control or a husband could rent off the wife and vice versa – or another relative. Many many things to consider though.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of jsawtelljsawtell
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    Terryw wrote:
    Hi

    You can't rent your own property, but you could rent one owned by a company or a trust that you control or a husband could rent off the wife and vice versa – or another relative. Many many things to consider though.

    Hi Terry,

    This sounds very interesting.  Where can I find more information on this?  Eg. if I own a property 100% in my name, can I rent it to my wife? 

    Thanks
    Jason

    Profile photo of TerrywTerryw
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    Jason

    ask your accountant. You have to be careful if you live with your wife!

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

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

    Profile photo of Ben EllingsenBen Ellingsen
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    @ben-ellingsen
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    You can purchase the property in a Trust or Company and rent it to yourselves (at market rent). However, Companies and Trusts can never receive the main residence exemption, so whilst there will be some initial tax benefits, CGT will be payable on the sale.

    Profile photo of icecoolicecool
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    @icecool
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    thks terry & ben.

    So Ben, in order to rent back to live myself I will have to first set the Trust to purchase the property in a Trust or Company. How will you structure it for maximum benefits if it were you?? appreciate your advice. thks

    Profile photo of Richard TaylorRichard Taylor
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    @qlds007
    Join Date: 2003
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    IC

    Have just dropped you an email in answer to yours.

    One of the issues about Transferring the property into a Trust or Company structure is that you will incur both Stamp Duty and LMI again and it probably not worth it.

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
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    100% Investment Finance now available on selected properties. Email us for further information.

    Profile photo of icecoolicecool
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    @icecool
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    thanks Richard for your quick respond. Talking to a like-minded & knowledgeable broker is indeed a totally different learning experience for us! how much do you recon the bank willing to loan us base on our circumstance?
    thanks

    Profile photo of TerrywTerryw
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    @terryw
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    Ice,
    some things to consider.

    If you are director or an employee of a company and live in a house owned by the company there may be FBT issues.

    If you purchase in a discretionary trust you may find there is a taxable loss. This loss cannot be offset against your personal income. So if your trust has no other income, it may be to roll loses forward until your properties become cashflow positive.

    The ATO has put out some rulings concerning renting from your own unit trust – they don't like it.

    Some creative thinking should help your distance yourself a bit from the trust and come in under the radar.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

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

    Profile photo of ptykitptykit
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    Hi all,

    Can I ask a question about capital gain on an investment property?

    I bought a house in 2005 to live in and moved out in 2007, it has been renting since then. I just realized that I should get a house valuation done before it became an investment property. I plan to sell the house in 2010, can I do a valuation now in order to help me pay less in capital gain? Can a house valuation be back dated?

    Thanks for your help.

    Profile photo of Ben EllingsenBen Ellingsen
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    icecool wrote:
    thks terry & ben.

    So Ben, in order to rent back to live myself I will have to first set the Trust to purchase the property in a Trust or Company. How will you structure it for maximum benefits if it were you?? appreciate your advice. thks

     
    I agree with Terry's comments regarding the quarantining of the losses – hopefully you are purchasing a positive cash flow property – and FBT – however, as you would not be classed as an employee for common law purposes, FBT is easily avoided.

    Profile photo of Ben EllingsenBen Ellingsen
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    @ben-ellingsen
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    ptykit wrote:
    Hi all,

    Can I ask a question about capital gain on an investment property?

    I bought a house in 2005 to live in and moved out in 2007, it has been renting since then. I just realized that I should get a house valuation done before it became an investment property. I plan to sell the house in 2010, can I do a valuation now in order to help me pay less in capital gain? Can a house valuation be back dated?

    Thanks for your help.

    Providing you can find a valuer or real estate agent to value the property as at 2007 (and note this in the valuation) there is no problem with "back dated" valuations.

    Profile photo of Edvico_kvnEdvico_kvn
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    @edvico_kvn
    Join Date: 2008
    Post Count: 46

    Ptykit,

    A valuer can provide a backdated valuation – thats not a problem.

    Based on the info provided so far, it sounds like you might be able to apply the 6 year CGT absence exemption rule (provided you haven't purchased another property while owning this property).  In that case, you can sell in 2010 CGT free and a backdated valuation is not required (and don't need to spend your money on a valuation).

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