Hi everyone,
I have a few questions around how to maximise the benifit of my situation.
I am currently building my first home in QLD and construction should finish in mid-late August. I wont be able to move in until late December but I am currently living rent free. My wife and I have decided that instead of moving into our home, which is in another town to where we currently are, we would sell up our belongings and go backpacking around the world for 6-12 months.
I am currently running the numbers on renting it out, losing the FHOG, claiming the interest on tax, etc. In speaking with others they mentioned some loophole regarding living in it to start with, then renting it out before living in it again, regarding CGT or something.
Our future plans are a bit up in the air atm. After coming back from holidays and moving into the home we will probably live in it for 18mths, then move elsewhere for two years before moving back and living in it permanently to raise a family.
The property value is around $550K with $390K financed and about $70K sitting in an offset account. Rental return should be $850/wk which would positive gear the property (I'm not sure what value to expect on the depreciation report though).
I'm not that interested in negative gearing as the -ve cash flow whilst on holidays will end up making us come home earlier than expected. I'm not sure what I should do with the following though:
– Refinance and maximise the loss to a neutral gearing position and put the excess cash in a high interest savings account whilst travelling (In my wifes name to reduce tax), then dump whats leftover back into the home when we get back.
– Leave the finance how it is, keeping the cash in the offset to maximise the cash flow
– Hold the property as a PPR and rent it to mates off the books to get the FHOG and keep the stamp duty exemption
– Rent it out but make sure it is empty before the first 12 months are up to claim the FHOG.As we are only going to be working for 6 months before jetting off, My tax rate for the year will be quite low,
I'm new to the property game so I am sure there is a lot I haven't considered. Any advice would be much appreciated.Hi
Refinancing won't affect deductibility, increasing the loan won't either unless the extra borrowed is invested.
New tax free thresholds mean you can each earn about $20,400 next financial year and pay no tax.
Can't comment on the proposed fraud aspects!
Look at the 6 year rule under s118-145 ITAA 97 which will allow you to rent out the property without losing the CGT exemption – in some circumstances.
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
Thanks for your reply Terryw,
I did some searching around to better understand what you mean. I grasp the concept of only being able to deduct the interest that would have been payable on the first loan. It seems that I was lucky to go for the 100% offset account from the begining. Am I right in thinking that once I have tenants in, I am able to move the cash in the offset to a high interest account to achieve a profit loss balance (pushing me more negative or positive). I suppose my question more leans towards, should I neutral or positive gear, given that I have some cash to be able to manipulate the cash flow.
The 6 year rule is what I was looking for, thank you for that.
hey bass, i've done travelling while property ivnesting too. itcan be a very fun and rewarding experience. I talked to my accountant before I left Australia though just to sort out my accounting
Hi I want to do a similiar thing and rent out my 2 investment properties. Usually im in the high tax bracket but if I dont work for 2 years can I still claim the depreciation. Im Positive geared at $30K a year with $20K depreciation. If I dont pay tax by sailing and not working I dont get a tax return and loss my lovely (money for jam) depreciation. Is it true
You can still claim all the normal deductions if you are not working, but your income will be limited so your may not get much back if any at tax time if you have paid no tax.
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
yeah thats' true….i think it would be best to talk to an accountant about this..
they can give an idea about how much of a deduction you can make
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