Hi everyone,
I'm looking for some info and hope someone can help….it would be greatly appreciated.
My plan is to move out of my PPOR and into an IP and live in it while I renovate. I would rent out my PPOR and the income I would receive would enough to cover all costs. I would leave the current loan as P and I on my PPOR but plan on taking out an IO loan on the IP. The reason is that the loan amount would be quite high on the IP and I would be able to deal with the repayments a lot easier with an IO loan.
If I do not claim any tax refunds on my PPOR, do I have to declare the rental income that will cover the costs? Secondly, can I claim tax refunds etc on the IP property I will be living in while renovating? In effect, I will be renting the IP property from myself and declaring it as rental income and claim all other deductions as allowed on the IP along with reno depreciation etc.
Can I do this or is there a better way? Any comments would be really appreciated.
Thanks
Richard.
I think what you are planning to do borders on tax evasion; illegal.
As far as I know, you can't rent your IP to yourself and claim the deductions on it.
Otherwise everyone would be declaring their PPoR an IP and pay "rent" back to themselves and get the deductions. I'm sure the ATO would close up that loophole quick smart.
Also, you can't claim the reno costs on your IP while you are living there and renovating, unless it has been advertised for rent while you are there. But again; this is treading on dangerous ground; the ATO may not allow the deductions as you are living in it at the time.
There are certain ways you can do it where you own a company, run a business. You then buy property and rent the property to the company to conduct its business. Talk to your accountant about that one.
If you are earning a taxable income, it would probably work out better for you to declare the rental income from your PPoR as you can also deduct the costs to hold your PPoR from your taxable income. You can do this for up to 6 years before you are liable for any cap gains tax on the PPoR should you decide to sell it. Again; talk to the accountant.
Thanks Marc….I sure don't want to do anything illegal. What you've said sounds right, but will talk to the accountant as you suggested.
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