I have been given the option of going away for work for about 6 months.We thought instead of renting our house to tenants, we woudl ask my brother to “house sit” for the period and just pay enought to cover the mortgage costs on our behalf wheile we are away. Is this cash option better or should we rent it out officially (still using the brother as the tenent but through an estate agent) so that we can claim it on tax? Is this legal????WHich was would be be better off? What would happen if we were offered to wextend the work for 12 months and so had him paying cash for 12 months to us? [inlove]
Snowflake
Hi As,
The critical issue is that the rent struck reflects the market rate. As such I would suggest you get one or two rental apprisals done for you and use the results to determine the ‘rental rate’.
You can self manage – there is no issue there provided you do receipts and declare all income.
There is expectation amongst ATO Law that requires transactions of this nature to be reflective of the wider market and to be at ‘arms length’ – similarly any payment in advance agreements should be recorded in the ‘lease agreement’ you draw up.
There is no problem if your work period extends – given this is your PPOR you will have a 6 year window in which you can rent this property with no impact on your CGT liability in the future.
Derek
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http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113I would not rent to family again without a manager.
This would have saved us alot of trouble. It’s the little things like “The light bulb in the kitcken is broken, when can you fix it?”This was one with a manager, and we told her that we have a manager for a reason. We did not want the Sunday get together to become a maintence checklist.
She found out the hard way that things like this were her problem.
CATA
Asset Protection Specialist
[email protected]It would probably depend on the amount of rent compared to the interest. If you will be making a loss, then you may as well claim it, if making a gain, then you will be paying extra tax.
Don’t forget to take into account depreciation, interest, loan establishment costs etc.
Terryw
Discover Home Loans
Parramatta
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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