Hey guys
I’m entering the property market and need some help with something.
I am not sure whether to make my first property an IP or PPR
I want to try and work out whether the tax breaks and other savings of a PPR will justify the loss of rental income from an IP for the year of which I have to be living in the property to deem it a PPR
My question is what expenses/incomes can be associated with both an IP and PPR i.e. Taxes, Tax breaks, FHBG, stamp duty, other bills, etc
Also with stamp duty and FHBG, I have heard many rumours about them being taken away is there any truth to this? And are there any exemptions or concessions for stamp duty if it does stay put?
FYI: The property that I plan on buying is a 2 bedroom and therefore even as a PPR I would receive a rental income for 1 room (less obviously than an IP) and if I’m not living in my PPR I would be renting a room elsewhere.
Cheers
Adam
Hi Adam
Funny this is a question i probably get asked more than most from forum clients and in fact there is no right or wrong answer.
Depending on the State you are purchasing in you will probably loose the Stamp Duty concession if you buy the property as an IP first up and that could be a sizeable amount. The $7000 FHOG will still be available second time around if you choice to make the property an IP.
Also remember the FHOG requirements are that you reside in the property for 6 continual months commencing in the first 12 months.
As a guide assuming you were buying in Qld and the property costs $400,000 the saving in the Stamp Duty would be around just shy of $12,000. Certainly unlikely to be getting that back in way of a Tax credit over a 6 month period.
My suggestion would be to ensure you structure the loan correctly from day, buy it as a PPOR and then you can always look to move out of the property and rent it in the future.
Flexibility is the key.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
i suggest you run some figures.
Also consider CGT as if you initially live in the property and later move out you may be able to retain the CGT exempt status of hte property
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
My partner bought her first property in Ballarat Vic in 2009, the main reason for the location was because the Vic gov was offering 40K to buy in a regional town. Purchase price was 205K so she didn’t have to put a cent down. Anyway she was in a similar situation to above.
We found that it was best to buy as PPOR, she was then able to rent it out for the first 6 months from Dec to June. Her tax was done first week of July and then moved into the property to tick the box of living in the property for 6 months continuous starting within the first year.
Due to the fact she rented it out first and the time frame being Dec-Jun her tax return paid all her mortgage for the 6 months she lived there. On completion of the 6 months of living there it was rented back out.
It worked for her. Food for thought.
Qlds007 wrote:My suggestion would be to ensure you structure the loan correctly from day, buy it as a PPOR and then you can always look to move out of the property and rent it in the future.Yep, this is my general line of thought as well.
Also, a handy way to get the best of both worlds is to purchase something that you can add value to without too much cost. While living in it – carry out some basic renos like new paint, flooring, landscaping, etc. Once completed, have it revalued. Hopefully it's gone up a little and you can access that equity to purchase your first IP.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
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