All Topics / Legal & Accounting / advice on renting out primary residence and renting elsewhere

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  • Profile photo of garoopnagaroopna
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    @garoopna
    Join Date: 2009
    Post Count: 3

    We have been given the opportunity to put our house on the rental market and rent elsewhere for cheaper. Does anyone think this is a good idea or has had experience doing this? What could our financial benefits be? Any advice would be appreciated.

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
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    Can be good as you can, maybe, negative gear and save tax. And you can still be able to keep your original home CGT free.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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    Profile photo of JleeJlee
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    @jlee
    Join Date: 2008
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    I own a biggish house which is now fully paid up. I intend to put it up for rent and rent a smaller place to live.

    Will I be able to claim the rental I pay for the smaller house as tax deductions from the income I get for renting my own house? Is anyone able to advise on this?

    Profile photo of Richard TaylorRichard Taylor
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    @qlds007
    Join Date: 2003
    Post Count: 12,018

    The rent you receive on your old PPOR wil be added to your Taxable income.

    Unless your rent on the new premises you are residing in are used for any form of business then unfortunately you will not be able to claim the rent as a deduction.

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
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    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of ducksterduckster
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    @duckster
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    Jlee wrote:
    I own a biggish house which is now fully paid up. I intend to put it up for rent and rent a smaller place to live.

    Will I be able to claim the rental I pay for the smaller house as tax deductions from the income I get for renting my own house? Is anyone able to advise on this?

    You can't claim the cost of renting another house you live in off the original rental home income.

    Is it in your interest to get a tax deduction. What is your marginal tax rate. Is it 30% if it is you could pay 30% tax on the first property income and use the 70% left over to help pay off another home loan for the next house you live in.

    Or live in the bigger house and rent out the new smaller investment house loan and pay it off with the rent you are not paying or loan repayments you are not paying on the first house you have paid off..
    (When you have a house paid off you can get an equity loan against it to cover the deposit for the second investment house. )
    (or use first house and second house combined as security – more risky as you can lose both houses if you get behind)

    Profile photo of JleeJlee
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    @jlee
    Join Date: 2008
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    Thanks for your feedback, Richard and Duckster.

    OK I get it that I can't claim the cost of renting another house as tax deducrion from the rental of my own house. But if I happen to still have a mortgage on my house, guess I would have been able to claim mortgage repayments against the rental income?

    Profile photo of WJ HookerWJ Hooker
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    @wj-hooker
    Join Date: 2007
    Post Count: 272

    Jlee,
             Yes.
    Also land taxes, council rates, insurance, repairs, depreciation on assetts and building, etc just as per a normal rental property. I know of a few people that have done what you are trying to do. But most of them came out in front mainly because they had large loans and have moved back into their own house when loan repayments have decreased.

    Profile photo of FletcherTaxFletcherTax
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    @fletchertax
    Join Date: 2009
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    Just be mindful that the CGT exemption only applies for 6 years of absence from your PPOR. Afterwhich, an apportionment will apply (ie not be fully CGT exempt) or you need to reoccupy the PPOR to get a further 6 year exemption.

    Fletcher Tax Accountants
    http://www.fletchertaxaccountants.com.au

    Profile photo of wisepearlwisepearl
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    @wisepearl
    Join Date: 2009
    Post Count: 264

    just a quick question on the CGT exemption… I bought in Oct 2005 and lived there as PPoR until Feb or Mar 2007. From then it became IP and I moved overseas… I'm back in Aus now but chose to rent and keep my place as IP.

    Is the 6 year absence from the month the property ceases to be PPoR and becomes IP, or from purchase date? and if I want to keep it as legal PPoR for CGT exemption how long is the period required to reoccupy?

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,190

    see

    The date is from the date of absence.
    http://www.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/s118.145.html

    There is not minimum lengh listing in the legislation. Seems as long as it is your main residence and you are absent, then the rule can apply.

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

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