G'day all…
I own 3 investment properties and am presently building my PPOR. My wife and I are planning on living in our new house for 2-3 years before upgrading to one of our investment properties which is a 4 bedroom 3 bathroom property. I just want to know how to best utilise the tax loopholes as we are planning to rent out the house we are building now in 2012, but also renovate the investment property we have now but planning to move in to in 3 years time. Is this confusing? I suppose my question is when should we renovate our IP? when it is still a rental or when it is our new PPOR? I get very confused with CGT exemptions… any help much appreciated. Cheers
tuggerTugger
Couple of things to note.
Most lenders will allow ther loan to be an interest only loan during the construction phase and then try and convert it to principal & interest on completion. Make sure the loan remains Interest only with a 100% offset account to the loan.
When you decide to move out and into one of the IP's switch the offset account to the property in which you will reside in thus not only maximising your interest savings but also preserving the deductability of the loan interest.
With regards to the house you will live in eventually you would be better off to undertake any work or renovation whilst it is an IP so at least you an claim the Building Write Off etc for a year or two.
Richard Taylor | Australia's leading private lender
Thanks Richard… so if I want to fix up the bathroom and kitchen then I should look to do that in the next few years while it is an IP. My concerns are obviously putting in a lot of new stuff while tenants are living in there, and how this will affect my CGT? How will CGT work when I move in to my IP… I have owned it since 2007 and plan to move in in 2012…. Thanks Richard
tugger
Tugger
Some food for thought:
As per Richard's suggestion – I too would suggest to get a deduction or claim for any expenses/purchases done to your IP whilst its still your IP. Even if it is for 2/3 years. (… Better than NIL once its your PPOR)
Also I strongly suggest getting a market evaluation by 3 local agents in writing of your IP when your IP becomes your PPOR – becomes so much simpler for taxation purposes down the track when and if you sell it.
In regard to CGT – dates and market values are very important. You need to clearly note for yourself and on your tax returns when your property becomes your PPOR and/or stops being an IP. When you sell your IP which will become your PPOR – an apportionment will need to be made between the investment and main residence side of things. Hence paperwork is crucial!
Linda
Fletcher Tax Accountants
http://www.fletchertaxaccountants.com.auG'day Linda…
Thats some great advice…. thanks heaps for that. Just a quick question as to getting 3 independent valuations done on my IP before I move in and use this as my PPOR…. how will these valuations be used down the track? Will it be for CGT purposes, and how will a high/low valuation effect my CGT? Cheers
tugger
Hello again
The 3 valuations (and average of) can be used as the adjusted cost base upon the eventual sale. It is called "Market Value Substitution Rules"
Linda
Fletcher Tax Accountants
http://www.fletchertaxaccountants.com.auThanks Linda…. I will try and remember this down the track when we go down that path. Cheers
tugger
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