Hi we have just closed on our first property which is a rental. We would like to renovate to increase value and equity but people keep telling me to wait twelve months to avoid capital gains or if we do it now we cant write the expense off. Weintend to keep the property but want to increase equity to keep investing. Ive read in books people renovating and selling sometimes before even closing. Can someone explain how all this works.
jay.
Beware of taking advice from friends. Why wait? did it now, add value and access the equity for more properties.
It should have no bearing on CGT – especially if not selling!!
Also you cannot write it off unless it is a repair. If that is the case, you can repair anything anytime – if broken. If not a repair, you can still claim depreciation on building and fittings etc.
Terryw
Discover Home Loans
Mortgage Broker
[email protected]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
Hi Jay,
Initial repairs are tricky. If a house needed painting, for example, when you bought it and you elected to do this prior to renting it out, you are essentially making ‘an improvement’. Strictly speaking, the cost would be added to the cost base of the property thus decreasing your capital gain when you sell. This may be what your friends are getting at.
If you can get tenants into the property and then do some work after, say 6 months, you may be able to claim some of that work as repairs and therefore write it off. Be careful about claiming too much as repairs too soon.
You sound like you’re in a bit of a hurry, though.
Regarding renovating to resell quickly, a mate of mine did this (post settlement) and was crowing about the profit he made. I hated doing it, but I quizzed him on the cost of acquiring the property (esp stamp duty), the holding cost (interest on his loan), the opportunity cost of the work he did himself i.e. he took time off from paid employment, the cost of selling, and the CGT payable. And they’re just the most obvious costs. he went all quiet after that.Tax Depreciation Schedules
Australia wide service
1300 660033
[email protected]
http://www.depreciator.com.au
You must be logged in to reply to this topic. If you don't have an account, you can register here.
