hi i'm planning to start my investing journey ! i need to know shall i buy my first PPOR or spend my money on purchasing property where i can rent out for money ? to my knowledge there are benefits of getting tax deductible from investment property . on the on the other hand , PPOR will get capital gain tax exemption! please share your knowledge thanks my goal is to build a portfolio of properties !!
Why not do both?
I've had a fair few clients purchase their first home and an IP shortly after. Here's an article I wrote for API magazine on the topic.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
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There are lots of variables here so can't comment on which is better for you.
If you want to live in an area that has a low yield you can be better off renting (as it's cheaper than buying) and buy an IP in an area where yields are higher (thus covering most of the costs).
You may also live in it for a while then move out and rent it under the 6 year rules, thus avoiding CGT (assuming you don't buy another PPOR in the meantime).
Most people do like to own their own home, but that can come later also.
Personal choice.
hey thanks !!!!
Which state is the property?
Another common strategy is to purchase an PPOR property and then develop it and turn into a hybrid PPOR/IP investment.
Get specific advice on this.
TheFinanceShop | Elite Property Finance
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Email Me | Phone MeResidential and Commercial Brokerage
Why not do both!
Buy PPOR and later rent it out, claim everything, but still apply the main residence CGT exemption under s118-145.
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
HI,
I would suggest to look at how the ATO is looking at PPR turning into Investment Properties. If you were to move into a property as your PPR and renovate, keep it for more than 12 months to offset the Capital Gains Tax, and then sell, the ATO is watching these transactions, especially if this is done on more than one occasion. If you were to keep the first PPR as an IP and purchase your next PPR all good, but be mindful of what your strategy is from there. I recommend you talk to your Accountant or at least get onto the ATO website to research any changes. The idea that has been the norm for years is to buy a house, live in it whilst you renovate and then sell after 12 months to avoid Capital Gains Tax, move on to the next house and do the same, lookout the ATO are on to this and you may find all of a sudden you are in the business of Renovating and liable for GST and Income/Business Tax!!!!
Cheers Grant
Grant can you list some actual ATO cases of that happening.
Because i cannot think or find any on the above scenario.
I think the ATO would have a very difficult case to prove that If a person still worked a normal job and derived their income from their profession that they are in the business of renovating.. their own PPOR.
People have to live somewhere, its also your choice to renovate your own home, some people actually enjoy that.
I can now remember a case where a man had lived in over 20 homes in 30 years. He had never bought a single IP or rented, He always moved into a new PPOR. They tried to take a case to him and his reply was that it was his hobby. He enjoyed it. Never heard a word back.
I also know several developers who do up their own homes (which they own in their own names) and they still get the exemption. They run their business through different company names and trusts to differentiate the two.
Hi Wilko1,
The ATO is forever changing the legislation and policies. The last amendment was on the 20 th June 2013. I have noted two useful links into the ATO website which will explain a few different scenario's and also the 2013 Property Investment Guide.
A little research upfront is always advisable because if the ATO start looking into your Property Investment transactions, it is very likely that it will not stop there!
http://www.ato.gov.au/uploadedFiles/Content/MEI/downloads/ind00342353n17290613.pdf
Cheers Grant
GrantMck wrote:Hi Wilko1,The ATO is forever changing the legislation and policies. The last amendment was on the 20 th June 2013. I have noted two useful links into the ATO website which will explain a few different scenario's and also the 2013 Property Investment Guide.
A little research upfront is always advisable because if the ATO start looking into your Property Investment transactions, it is very likely that it will not stop there!
http://www.ato.gov.au/uploadedFiles/Content/MEI/downloads/ind00342353n17290613.pdf
Cheers Grant
Grant,
The ATO doesn’t change the legislation and doesn’t have the power to. Legislation is changed by government.
The ATO does change focus, and does ignore and misinterpret legislation sometimes.
On this topic, I think the law is clear. If someone is buying and renovating ‘as a business’ then they can be taxed as a business and the main residence exemption won’t apply.
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
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