Hi all,
I am considering purchasing a new PPOR and keeping my current PPOR as an investment property. I am unsure of the amount of interest I could claim as a tax deduction on the IP – My wife and I built the house a number of years ago and have refinanced a couple of times since then for property improvements and a car. While I understand the interest on the loan used to purchase the car cannot be included I don't know about the property improvements? The house and land only cost about $120K which really only included 4 walls and a roof! Since that time I have spent about $50K on landscaping, pergolas, heating & cooling, etc.
Alternatively, would I be better off transferring the house to myself (higher income) and negatively gearing the full market value ($350K) and wear the stamp duty costs?
Thanks
2Cif the renos were done to improve the house that you are going to be making rental income out of, then the interest should be deductible.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Alternatively, would I be better off transferring the house to myself (higher income) and negatively gearing the full market value ($350K) and wear the stamp duty costs?
This will depend on numourous factors including: Your marginal Tax rate, the State in which the property is located, how long you intend to keep the property, likely purchase price of your new property etc etc etc.
Richard Taylor | Australia's leading private lender
Terryw wrote:if the renos were done to improve the house that you are going to be making rental income out of, then the interest should be deductible.I agree with Terry – the interest on the loan in relation to the renovations will become tax-deductible when the property becomes available for rent. Should also see if you could claim the capital works deduction in respect of the capital expenditure incurred on the renos.
For future CGT purposes – you are taken to have acquired the property at its market value when it becomes a rental property. In other words, any value increase in the property from that time to when you sell may attract future CGT.
Eddie
[email protected]Qlds007 wrote:Alternatively, would I be better off transferring the house to myself (higher income) and negatively gearing the full market value ($350K) and wear the stamp duty costs?This will depend on numourous factors including: Your marginal Tax rate, the State in which the property is located, how long you intend to keep the property, likely purchase price of your new property etc etc etc.Hi Richard
I am about $5-10K into the 40% tax bracket, in South Australia, intend to hold the property for at least 10 years and looking to spend $400-450K on the new property. I am also mindful that a trust structure may be beneficial/more flexible in the future so I wouldn’t want to pay stamp duty now only to have to pay it again in 5-10 years to transfer it to a trust.
Thanks for your reply
Cheers
2Ceddiec wrote:Terryw wrote:if the renos were done to improve the house that you are going to be making rental income out of, then the interest should be deductible.I agree with Terry – the interest on the loan in relation to the renovations will become tax-deductible when the property becomes available for rent. Should also see if you could claim the capital works deduction in respect of the capital expenditure incurred on the renos.
For future CGT purposes – you are taken to have acquired the property at its market value when it becomes a rental property. In other words, any value increase in the property from that time to when you sell may attract future CGT.
Eddie
[email protected]Thanks Terry & Eddie. I will investigate the capital works deductions as I hadn’t considered this previously
2C if the property is transferred into Trust you will pay Stamp Duty on the date of Transfer and not again unless the property is transferred to another entity.
If paid now and you keep the property for 10 years and then sell it you only pay it once.
Richard Taylor | Australia's leading private lender
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