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  • Profile photo of siewlinsiewlin
    Participant
    @siewlin
    Join Date: 2012
    Post Count: 19

    Hi I'm planning to buy an investment property. However, I will still have to pay rent elsewhere for my place of residence. That's when it struck me why not stay in my new investment property where I will be my own tenant for a while (until I move to a new town), esp where my current rent is similar to the expected rent from the new property. Will that be an issue on the tax or legal side?

    My concerns are:-
    1. Will I still be eligible for tax deduction on the IP mortgage?
    2. Are there other tax benefits from IP?
    3. Who is the best counsel in that area?

    Thanks!

    Profile photo of Rick staRick sta
    Participant
    @rick-sta
    Join Date: 2011
    Post Count: 119

    If you live in the property that you buy, none of it’s expenses will be tax deductible.

    Profile photo of TheFinanceShopTheFinanceShop
    Participant
    @thefinanceshop
    Join Date: 2012
    Post Count: 1,271

    The one big thing that sticks out for me is CGT. You need to plan for this more than anything else. Please see your accountant about this point. 

    It will also make sense to talk to your banker or broker about correctly structuring your finance to meet your tax objectives. You need to think about what you plan to do with the property in a few years time as well.

    TheFinanceShop | Elite Property Finance
    http://www.elitepropertyfinance.com
    Email Me | Phone Me

    Residential and Commercial Brokerage

    Profile photo of N@than[email protected]
    Participant
    @n-than
    Join Date: 2010
    Post Count: 241

    So basically you will be buying as a PPOR and then turning it into a rental later on down the track? Is that what you mean?

    Profile photo of CatalystCatalyst
    Participant
    @catalyst
    Join Date: 2008
    Post Count: 1,404

    It's not an IP if your are living in it. You can't claim any deductions while you live there but it could be advantageous from a CGT perspective.

    If you live in it first then move out you can use the 6yr rule and rent it out for 6 years and not pay CGT (assuming you do not own another PPOR).

    Profile photo of vagirl2012vagirl2012
    Participant
    @vagirl2012
    Join Date: 2012
    Post Count: 47

    Yeah no tax deductions available if you live in it, but CGT down the track is an option.

    Profile photo of siewlinsiewlin
    Participant
    @siewlin
    Join Date: 2012
    Post Count: 19

    oh thanks for all the comments . i'm not buying as PPOR but as an IP.

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    If you live in the property it would be classed as your main residence and not an IP.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of CatalystCatalyst
    Participant
    @catalyst
    Join Date: 2008
    Post Count: 1,404

    You don't buy it AS a PPOR or an IP. It is what it is. You can claim 1 residence as your PPOR. So if you live in it you can't claim it as an IP (as stated).

    Sounds like you want to have your cake and eat it too. If you claim it as your PPOR you will not pay CGT but can't claim interest etc. If you claim interest etc you pay CGT. Decide which way you want to have it.

    Profile photo of Josh AthertonJosh Atherton
    Member
    @josh-atherton
    Join Date: 2011
    Post Count: 269

    Hi Siewlin, 

    as everyone has pointed out already, the properties purpose is for you to live in it until at which point it becomes income producing from an arms length transaction. Therefor you will NOT have any tax deductions until you rent the property out. You cannot rent the property to yourself. Some investors use convoluted trust structures to do this however if you are not self employed or have other income than PAYG i wouldn't bother even exploring this, its not a simple (or always right) path to go down.

    if the rents are the same on something you see yourself living in, from a cashflow perspective you could be better off by renting another house and having yours as an IP depending on depreciation etc. There are a number of other factors to consider here also, including CGT etc.

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