Hey,
I have a question about the use of the first home buyers grant. I read on the first home buyers grant website that the conditions of the grant were as such that ” You must make the place your primary place of residence for a time period of 6 months starting within the first 12 months” Does this mean i could rent the place for 11 months before moving in on the first day of the 12th month?Regards
StephenYes,
It was aimed at people buying homes that were already tenanted – the loophole allows you to let a lease expire before you move in.
It does mean you can rent a place within that first year but I suggest you consider not doing so.
There are CGT exemption benefits from establishing a property as a home before renting it out.
Check it out.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 75% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
thanx,
ok but in my circumstances were i am only 17 and waiting till im 18 to use the grant plus what i have. I dont want to leave home untill i am 19 and will begin looking for an investment propery when im 18 and have acess to the grant. The CGT benefits will only affect me if i wish to sell,however i am not interested in ever selling as i would rather take advantage of the capital growth to contunue to invest. When i do move in after the 12 months i will move in one room and lodge out the rest of the place for further income to support reypayments.
Is all of this legetimate? or have i been mistaken along the way?
thanx a lot
stephenI cannot see any problems with your plan.
Of course your room mates are just contributing to the expenses of the place – not actually paying you rent which you will need to declare etc
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 75% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Am i not legally allowed to lodge out the rest of the place and actully recieve rent from them during the 6 months in which i plan to live there because of the conditions of the use of the grant?
What i mean is say if it was a 3 bedroom place then charge rent for people living in other 2 roomsplz clarify!
stephen
Yet another question of mine is how much percent of the rent would i be likly to receive in this for example.
renting a standard size three bedroom place compared to lodging two bedrooms of the place and living in one bedroom myself?
stephen
You would have to check around your area.
You may get more.
I say this as I have a house I rent by the room. I get $100 per room for a house prob worth $280 pw rent. There are 5 rooms.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 75% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
I used first home owners grant and charge rent to the other inhabbitent while i am also living here. no problems.
Originally posted by stephen051:Am i not legally allowed to lodge out the rest of the place and actully recieve rent from them during the 6 months in which i plan to live there because of the conditions of the use of the grant?
What i mean is say if it was a 3 bedroom place then charge rent for people living in other 2 roomsplz clarify!
stephen
Hehe. Stephen, go back over what Simon said here
“Of course your room mates are just contributing to the expenses of the place – not actually paying you rent which you will need to declare etc”
Read that over and over until get what he meant. Think about it from a tax perspective and bare in mind that “rental” income is taxable……gedit?
Yes after reading it a few more times i understand it now thanx
Stephen
hey guys,been reading your posts, thanks for all the great info,
can some on please confirm that what you guys have been posting about is the same in all states, thinking of moving out and possibally interstate, maybe next year, and am looking for a first rental to purchase at the moment,thanks heaps
bMuch the same.
If you follow the links under FHOG on my website you will see all of the States Websites dealing with the FHOG which you can check.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Simon, this is a little off topic but do the rooms you rent out separately all have their own phone/internet connection?
I can imagine that it would be hard to find tenants without a ph/internet connection in every room?
Are the different rooms then billed separately, or is it one combined bill and do the tenants work all that out for themselves?[medieval]
Celivia
Two of the rooms have phone lines. One was there and the other has been installed by the tenant.
There is a wireless modem that I bought and the five people share an ADSL account together.
I paid line rental last year but was never reimbursed enough for calls so this year I gave it to them to run.
And no, I have no trouble flling it – could have filled three a tthe beginning of the year.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Originally posted by Mortgage Hunter:There are CGT exemption benefits from establishing a property as a home before renting it out.
Can you elaborate on this please Simon. I am trying to weigh up if it is worth it to move into a place for 6 months to get the grant, stamp duty exemption (NSW) etc before renting out. What are the CGT implications if I live there for 6 months?
If you own a home that you have established as a home before you then rent it out you have 6 years after you move out in which you can sell it and no be up for CGT at all. As long as you don’t own another “home” during that period.
At anytime you can move back in and should you move out again the 6 years starts anew.
This exemption can be worth a fortune should you be fortunate to hold the property during another boom such as the recent one.
Hope this helps,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
So is simply living in the home for 6 months sufficient to establish it as a home?
Do you have a link or any reference to the actual legal provisions for this?
Thanks for your quick response.
Follow the links on my website to your state’s authority on the FHOG.
As far as the CGT exemption goes you can search on the ATO site and find something like this (sorry can’t paste the URL):
Treating a dwelling as your main residence after you move out
Printable version
As a general rule, a dwelling is no longer your main residence once you stop living in it. However, in some cases you can choose to have a dwelling treated as your main residence for capital gains tax (CGT) purposes even though you no longer live in it.
You cannot make this choice for a dwelling before you first occupy it as your main residence.
Example
Not main residence until you move in
Therese bought a house and rented it out immediately. Later she stopped renting it out and moved in.
Therese cannot choose to treat the house as her main residence during the period she was absent under the continuing main residence rule because the house was not her main residence before she rented it out. She will only be entitled to a part exemption if she sells the dwelling.
When you can make this choice
This choice needs to be made only for the income year that the CGT event happens to the dwelling – for example, the year that you enter into a contract to sell it. If you make this choice, you cannot treat any other dwelling as your main residence for that period (except for a limited time if you are changing main residences).
If you do not use it to produce income, you can treat the dwelling as your main residence for an unlimited period after you cease living in it.
Example
Bill buys a unit and lives in it for three years. He then moves out to live with a friend, while his son occupies the unit rent free. He does not treat any other dwelling as his main residence. Twelve years later, he sells the unit and claims main residence exemption from CGT.
If you do use it to produce income, you can choose to treat it as your main residence while you use it for that purpose for up to six years after you cease living in it. You are entitled to another maximum period of six years each time the dwelling again becomes, and then ceases to be, your main residence. If, as a result of you making this choice, the dwelling is fully exempt, the home first used to produce income rule does not apply.
If you are absent more than once during the period you own the home, the six year maximum period that you can treat it as your main residence while you use it to produce income applies separately to each period of absence.
Example
One period of absence of 10 years
Home ceases to be the main residence and is used to produce income for six years
Lisa buys a house after 20 September 1985 and lives in it for two years. 10 years after she stops living in it, she sells it. During this period, she rents it out for six years and leaves it vacant for four years.
Lisa chooses to treat the dwelling as her main residence for the period after she ceased living in it, so any capital gain or capital loss she makes on the sale of the dwelling is disregarded. The maximum period the dwelling can continue to be her main residence while it is used to produce income is six years. However, while the house is vacant, the period is unlimited, which means the exemption applies for the whole 10 years. It doesn’t matter whether the period during which the home is used to produce income is a single block of six years or several shorter periods, so long as the total period it was used to produce income was no more than six years.
Because the dwelling is fully exempt as a result of Lisa making this choice, the home first used to produce income rule does not apply.
Example
Home ceases to be the main residence and is used to produce income for more than six years during a single period of absence
1 July 1990
Ian bought a home in Sydney and used it as his main residence.
1 January 1992
Ian was posted, by his employer, to Brisbane and bought another home there.
1 January 1992 to 31 December 1996
Ian rented out his Sydney home during the period he was posted to Brisbane.
31 December 1996
Ian sold his Brisbane home and the tenant in his Sydney home left.
The period of five years from 1992 to 1996 is the first period the Sydney home was used to produce income for the purpose of the six-year test.
1 January 1997
Ian was posted by his employer from Brisbane to Melbourne for three years and bought a home in Melbourne. He did not return to his Sydney home.
1 March 1997
Ian again rented out his Sydney home – this time for two years.
28 February 1999
The tenant of his Sydney home left.
The period of two years from 1997 to 1999 is the second period the Sydney home was used to produce income under the six-year test.
31 December 1999
Ian sold his home in Melbourne.
31 December 2000
Ian returned to his home in Sydney and it again became his main residence.
28 February 2003
Ian sold his Sydney home.
Ian chooses to treat the Sydney home as his main residence for the period after he ceased living in it. The effect of making this choice is that any capital gains Ian made on the sale of both his Brisbane home in 1996–97 and his Melbourne home in 1999–2000 are not exempt.
Ian cannot obtain the main residence exemption for the whole period of ownership of the Sydney home because the combined periods it was used to produce income (1 January 1992 to 31 December 1996 and 1 March 1997 to 28 February 1999) total more than six years.
As a result, the Sydney house is not exempt for the period it was used to produce income that exceeds the six-year period; that is, one year.
If the capital gain on the disposal of the Sydney home is $50,000, the amount of the gain that is taxable is calculated as follows:
Period of ownership of the Sydney home:
1 July 1990 to 28 February 2003
4,626 days
Periods the Sydney home was used to produce income after Ian ceased living in it:
1 January 1992 to 31 December 1996
1,827 days
1 March 1997 to 28 February 1999
730 days
2,557 days
First six years the Sydney home was used to produce income:
1 January 1992 to 31 December 1996
1,827 days
1 March 1997 to 28 February 1998
365 days
2,192 days
Income producing for more than six years after Ian ceased living in it:
365 days
Proportion of capital gain taxable in 2002–03
$50,000 X
365
4,626= $3,945
Because Ian entered into the contract to acquire the house before 11.45am (by legal time in the ACT) on 21 September 1999 and entered into the contract to sell it after that time, and owned it for at least 12 months, he can use either the indexation or the discount method to calculate his capital gain.
Note: 21 August 1996 important
The home first used to produce income rule does not apply because the home was used by Ian to produce income before 21 August 1996.hope this helps,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Mortgage hunter I would be very interested to know if you are in Victoria and if so what general area. ie North, South, etc. Is this because you are near a big Uni or what? would you attribute this too. How do you arrange the lease. Are you with an agent and therefore are you the head lessor and sublet. How do you get on if one is defaulting, or do you do the property management yourself which I can understand would be easier to arrange. Is the bond a 5th of the months rent, or larger?? Thanking you in anticipation.
Fern
The property is in NSW near a uni and I manage it myself. I have a months rent as bond and have 5 seperate agreements with tenants.
Noone defaults as I have a great system of selecting my students.
Give me a call if you want to ask more questions
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
