My mate and i have a unit on the same level in the same unit complex in sydney. They are both tennanted at the moment for the same value. He's over seas at the moment but wants to move back into his IP and use it as his PPOR. Is it possible that we could rent out the others unit on paper but actually live in the unit that we each own?
The reason for this is that both our units have large courtyards and we are paying to rent a unit that is inferior to the one we own and currently rent out. If it is possible that we could simply cancel the property manager, move back into our own units and pay each other market rent to be on the others lease agreement (basically we would be just swapping letter boxes).
Obviously we could then benefit from the deduction associated with an income producing unit BUT remain living in it as our PPOR.
Any advice on how best to structure such an arangement or any pitfalls would be appreciated. The powers that be would never be aware that, whilst we are technically renting off each other, we would remain in our unit.If the powers that be must remain unaware, it's probably not legal.
Your real question is 'can you get away with it', and I don't have an answer to that!You could do that. makes sense – but illegal as you would be defrauding the ATO. They may also get suspicious as to why you are renting across the hall? (maybe noise or sunlight issues?). If they think you are doing it just for tax reasons they could still disallow deductions. If they find out about your scheme of pretending to rent it out, they could charge penalities for tax avoidance.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
All you need to do is to actually move in to your mates unit and him into your.
Then they can't say anything, and you would not be breaking any law,
this is a strategy that was explained in Anita Bell's book
"You're Investment Property" as long as you both pay market rent.Yes it is definately illegal to live in your own unit while claiming someone else is renting it from you!! But I like your thinking, hmmmm – how to get away with it???? I think you could get away with it if you are smart – the only thing is if you happen to get audited and the ATO finds out, then they would do more than just disallow deductions. I think you could be charged $$$$ for misconception (the disclaimer you sign at the end of your tax return for example). So you need to weigh up the risk vs reward and work out whether it is worth it!
Good luck
TracyEasy to track, all they have to do is look up phone, utilities, etc to see where you are really living, so yes as indicated above I do believe it would be dlassified as FRAUD. However, if you did physically live in each others place then no worries as all you "proof of residential address" is at the renal premisis
Your real question is 'can you get away with it', and I don't have an answer to that!
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