Hi all,
Just a question about renting out rooms in a PPOR.
If I live in one room and rent 2-3 other rooms out can I claim a % of expenses?So If I rent out 3 rooms claim 75% of interest, maintenance, strata etc etc.
Reason for this is I can get a PPOR interest only loan with 95% borrowing and no LMI.
This will save me about $15-20K on LMI and I won't have to pay for rent which i currently pay about $170p/w.Also I want to rent out rooms individually so I can get more rent.
If I cant I would have to rent out the whole house but pay LMI which can be added to the cost but don't really wanna do this
Also do any banks consider rent as part of your income if its your PPOR I know my current lender doesn't
Not sure, I think yes BUT once you do so then also 75% of PPOR would be subject to capital gains!!
Try this website http://www.bantacs.com.au/ Might be something like your question already asked here.Hi Ryan,
From the ATO's Rental Guide
"If only part of your property is used to earn rent, you can claim only that part of the expenses that relates to the rental income. As a general guide, apportionment should be made on a floor-area basis, that is, by reference to the floor area of that part of the residence solely occupied by the tenant, together with a reasonable figure for tenant access to the general living areas, including garage and outdoor areas if applicable."
As Wobbly has stated above there could also be CGT issues to consider. The 6 yr rule may negate some of this – check with your accountant..
Thanks for that, tried using to ato website yesterday to get the information but it was down.
Anyways info here
http://law.ato.gov.au/atolaw/view.htm?docid=ITR/IT2167/NAT/ATO/00001
This is the exact same question I had in mind – thanks.
Hi RyanJD,
As you're renting out the additional rooms, you're not only entitled to claim a percentage on the interest charges & other expenses but you are also entitled to claim the same percentage on any tax depreciation claims available on the property.
Due to the fact that it's income producing, you can claim depreciation on all the fixtures & fittings and potentially the building (if it qualifies for building write off).
All in all it's going to put more money back in your pocket and will cut the weekly costs of owning this property quite substantially.
I hope this helps,
AnthonyB wrote:Hi RyanJD,As you're renting out the additional rooms, you're not only entitled to claim a percentage on the interest charges & other expenses but you are also entitled to claim the same percentage on any tax depreciation claims available on the property.
Due to the fact that it's income producing, you can claim depreciation on all the fixtures & fittings and potentially the building (if it qualifies for building write off).
All in all it's going to put more money back in your pocket and will cut the weekly costs of owning this property quite substantially.
I hope this helps,
How would you know 'how much' you can claim when filing tax and how much items (such as carpet, curtains, wall paint..if this counts) has depreciated by?
In order to calculate the depreciable values of all fixtures & fittings (i.e carpets, blinds, kitchen appliances, hot water systems, air conditioners etc), the building itself and common areas (if it's a unit) you will require a tax depreciation schedule to be completed by a qualified Quantity Surveyor.
The report will list every depreciable asset, it's value, the effective life and also the rate at which it depreciates year in-year out until the assets value is zero. You will then be able to claim a percentage of the depreciation (depending on the portion of the property currently leased 25%, 50%, 66% 75% etc or 100% when it's only used as an investment property). At the end of each financial year you lodge these figures with your tax return and depending on your depreciation claim & marginal tax rate, you'll end up getting some extra cash with your refund.
Too work out the potential depreciation claims on your property visit: http://www.bmtqs.com.au/TaxDepreciationCalculator.aspx?source=menu
I hope this helps,
JayDee26 wrote:How would you know 'how much' you can claim when filing tax and how much items (such as carpet, curtains, wall paint..if this counts) has depreciated by?HI JayDee,
Make sure you contact a depreciation company to get a report done.
The amount claimable can be up to 65% of total purchase price. Depending on the type of building I have also seen them higher than 65% (new property BTW)
As soon as possible after settlement get in contact with Anthony to discuss getting a depreciation report done. Do not rely on your accountant to guess some numbers. Get the experts in to provide you with a comprehensive report.
If it was only one room you were renting out then you could come to a "Private Agreement". Such as your flatmate pays all the expenses – such as groceries / power etc – AND does NOT pay you rent!! As soon as you recieve rent – then the tax dept will be interested (as it is income) – trade off being able to claim expenses pro-rata.
Not sure on limts as to what flatmates could pay (rates? Insurance? etc)….
There is a difference between boarders and renters – boarders just pay their share of costs, not for the room. Renters pay for the room.
In this I think the intent is to claim expenses so they would need to be renters.
I think you should seriously consider not doing this, ie claiming it, as the small tax savings now could be large tax losses later when you sell.
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
Depends on how good your crystal ball is – and how large your debt on PPOR is….Run some numbers
1) based on getting rent, claiming 75 % of expenses AND paying CGT on 75% of PPOR when you sell…..of course you need to predict when you will sell and how much capital gain there will be between now and then (say 4% per annum)
2) based on getting boarders to pay your expenses…..but no CGT issues.Will come down to how many expenses you can get paid, actual capital growth and amount of debt on PPOR.
Another thought – if you never sell then also have no CGT issue !! AND you can still leverage of the growth into more property. BUT dont think any lenders would think of your borders paying expenses as "income"
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