All Topics / Creative Investing / Renovating using a loan

Viewing 13 posts - 1 through 13 (of 13 total)
  • Profile photo of Die HardDie Hard
    Member
    @die-hard
    Join Date: 2011
    Post Count: 23

    Can anyone help with the following-
    If you take a bank loan to renovate and then claim the renovation loan as an investment expense, can you additionally also claim depreciation if you're renovating using a loan???

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    Yes – can claim interest on the loan and Yes can claim depreciation

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of grantos_champosgrantos_champos
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    @grantos_champos
    Join Date: 2009
    Post Count: 106

    Terry,

    What about if I renovate while it is PPOR then convert to IP down the track?

    Profile photo of Die HardDie Hard
    Member
    @die-hard
    Join Date: 2011
    Post Count: 23

    I know with the CBA at least they have two seperate loan categories which are personal loan and renovation loan on investment property.

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213
    grantos_champos wrote:
    Terry,

    What about if I renovate while it is PPOR then convert to IP down the track?

    If the property is rented then you should be able to claim any interest on loans used to acquire or improve this property and any depreciation on the fixtures and fittigs of it – subject to effective life of the item.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of LegendtofskiLegendtofski
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    @legendtofski
    Join Date: 2012
    Post Count: 5

    I'm thinking of doing a similar thing..HOWEVER I wish to move into my place of residence a few months after the work is done. Can only only claim depreciation for those two months or over the life?

    Or can I define the rennovations as a 'repair' since the kitch and bathroom haven't been fixed since the house was built (over 45 years ago!)

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    You shouldn't be able to claim anything as the work will be private in nature.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of LegendtofskiLegendtofski
    Member
    @legendtofski
    Join Date: 2012
    Post Count: 5

    The thing is I will be doing the rennovation while clients are renting the property..What about painting and stuff like that, its to update and repair certain features….

    Profile photo of MosquiMosqui
    Participant
    @mosqui
    Join Date: 2010
    Post Count: 43

    I think that you can only claim as long as you are receiving income from that property, so the claim is against the income. If you are living in the house you should not be able to claim anything.
    Check with your accountant

    Profile photo of miikemiike
    Participant
    @miike
    Join Date: 2008
    Post Count: 111

    Best to check with your accountant and also do the maths.

    Here is a good reference regarding the 6 year CGT exemption rule.

    http://www.ato.gov.au/corporate/content.aspx?doc=/content/86191.htm

    Cheers,
    Miike

    Profile photo of AnthonyBAnthonyB
    Participant
    @anthonyb
    Join Date: 2012
    Post Count: 18

    Hi All,

    Only when a property is income producing are you able to claim depreciation. This covers the building (should it qualify i.e built between July 18 1985 @ 4% over 25 years and Sept 15 1987 2.5% over 40 years), all the fixtures & fittings such as carpets, blinds, kitchen appliances, hot water systems (regardless of their age as they are revalued upon settlement and their effective lives start again) and any previous renovations carried out by yourself or previous owners.

    Repairs can only be claimed if you are actually repairing a particular asset NOT replacing it. If the asset is removed and replaced, it will be seen as an improvement. Improvements are classified as depreciable. If you are going to paint the property to improve it's value then the value of the painting will depreciate at 2.5% over 40 years. If painting is something you do every 12 months then it's a repair issue and you can claim it as an immediate expense through your accountant.

    Even though you are renovating while the property is tenanted, and you intend on moving in within a couple of months, you'll only be entitled to claim depreciation for that short period of time which may not be an awful lot of deductions in the grand scheme of things.

    I hope this helps,

    Profile photo of Die HardDie Hard
    Member
    @die-hard
    Join Date: 2011
    Post Count: 23

    Hi AnthonyB.

    That is some really good advice thank you so much.  So say for instance the bathroom ceiling needs some painting because of mould or water damage, if the invoice specifies repainting due to water damage or mould can that be claimed as an immediate repair or is it still depreciation?

    Profile photo of AnthonyBAnthonyB
    Participant
    @anthonyb
    Join Date: 2012
    Post Count: 18

    Hi Die Hard,

    In that particular instance it would generally be viewed as a repair and therefore claimed as an immediate expense.

    But, always best to discuss with your Accountant.

    I hope this helps,

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