We've recently purchased an investment property under our family trusts. We intend to rent it out but unfortunately we couldn't rent it out so our family is looking at fixing it up and moving in to it.
1. Since it has never been rented, can I claim this as my PPoR?
2. What will happen if I sell it one day, will the capital gain be taxed?
3. Any thing else that I should be aware of?
ptn.Scott No MatesParticipant@scott-no-matesJoin Date: 2005Post Count: 3,856
Firstly, you are a separate entity from your FT, so you cannot claim it as you ppor.
Secondly, the trust will be taxed on the CGT at its marginal rate.Dan42Member@dan42Join Date: 2008Post Count: 619
No, you can't claim the property as your PPOR, and, once sold, the CGT will be calculated at the marginal rates of the beneficiaries of the trust.
The trust will be able to claim interest, council rates etc, provided the tenants (you) pay a market rent.
ouch … kicking my self now…
For CGT, what happen if I live in there and not pay any rent?
CGT will be calculated on cost plus interest so it would be minimal wouldn't it?
ptnTerrywParticipant@terrywJoin Date: 2001Post Count: 16,213
If you don't pay rent you probably cannot claim any costs such as interest. It is not a commercial arrangement.
Furthermore, one of the beneficiaries of the trust could probably sue the trustee too for breaching its fiduciary duty to invest in the best interest of the trust.
CGT will be calculated on the gain less some costs – The size will depend on how long you keep it for and how big the gain is. The upside is you will be able to distribute the gain to low income earners to minimise tax.
Don't worry too much, just charge yourself lowish rent. Get the trust to furnish for you and depreciate everything. It might be good to be able to claim spoons as a deduction!
You can move out down the track. (maybe after depreciation is eaten up).
You will also have a problem if your trust doesn't have any other income if there is a loss. No tax savings.
So if I buy furniture; Plasma TV, HiFi System, Laptop, …etc. It can be a write off in CGT?
PTNTerrywParticipant@terrywJoin Date: 2001Post Count: 16,213
I don't think so.
Furniture items would usually be depreciated and claimed against income. But i am not an accountant, so please check