Lil,I would redraw the 10% deposit and split your loan (if your loan product allows splitting) into the 2 subaccounts.  The 10% deposit as one sub-account and the remainder in another subaccount.  The interest expense from 10% subaccount will be all tax deductible while the interest expense from he other subaccount not tax-deductible.In fact, if…[Read more]

Hi Terry,I like your idea of having the LOC pay for the IP running costs (including interest of the I/O loan) and thereby increasing your tax deductible LOC liability over time while at the same time the I/O loan for the IP remaining the same balance and the offset balance increasing over time.Do you recommend using the investor's salary/other…[Read more]

Hi Dan42,Continuing our conversation on this matter, the following ATO PBR is pretty much the same situation as "Stage's" circumstances.  i.e Property was purchased after Aug 1991, was let out immediately after purchase, become PPOR for 2 years and then was rented once again for several years.This PBR confirms that the interest costs an (rates,…[Read more]

Dan42,I didn't say the holding costs (interest, rates) etc were to be claimed  as a tax deduction.  I said you can add it to your cost base and hence reduce CGT payable."One trick that a lot of people don't know is that during the the holding costs during the PPOR years when you did NOT claim tax deductions on can be added to your cost base (…[Read more]

Stage,Your property won't be able to use the 6 yr absence rule since it was rented out as soon as you purchased it.  Living in it for the last 6 months prior to selling it won't make the place a main residence for CGT exemption purposes. One trick that a lot of people don't know is that during the the holding costs during the PPOR years when you…[Read more]

Investajt,One thing you can do is get a Line of Credit facility and borrow up to 80% LVR of your existing property.  Split the facility into 2 subaccounts.  One subaccount for investment purpose and the 2nd subaccount for PPOR purposes.  You will be able to claim interest on the investment subaccount only but the interest on the other PPOR suba…[Read more]

god_of_money wrote:
Kevin,What is your suggestion if the PPOR has been paid off prior to renting out??

GOM,In Hsingh's case, it is probably not a realistic situation for him/her to have their loan fully paid off as he was a FHB only 2 years ago.  Not many ppl can pay off the loan of their 1st home in 2 years!But if we continue with your…[Read more]

Hsingh10,I would get a QS report asap to work out how much depreciation you may claim each financial year.  Then I would look at getting landlord insurance to insurance against loss of rent and/or tenant damage.I recommend you structure your loan repayments to be Interest only.  There's no point paying off principal on an investment loan.  If you…[Read more]

BB8,Shopping around, looking for the lender that offers 0.1, 0.2, 0.3….% rate lower than other lenders is a waste of time as far as I'm concerned.  Sure you might save a little interest but if structured and "used" incorrectly, you loan will cost you much more and cause you to pay more tax than you have to.I agree with Richard in that you may…[Read more]

While there are certainly benefits in fixing your home loan rate (e.g certainty in your interest expense and potentially paying less interest than you would under a variable rate), one must not forget that you lose flexibility in your property investment/ownership decisions (Or at least it is going to be very expensive).What I am referring to is…[Read more]

Hi LGBW,Since your Broker advised that you don't have enough borrowing capacity to purchases another IP, you should perhaps consider renting out your current property and then yourself live an another rental property.That way you can claim tax deduction on the interest on the mortgage you are servicing (in addition to the other running costs plus…[Read more]

Kev2008,Probably the most important thing to keep in mind when renting out your place is to ensure the loan principal owing on your investment poperty (i'm assuming you've got a geared IP) is and continues to remain as 100% investment related.  In other words, ensure the purpose of the original loan drawdown and subsequent redraws/drawdowns are fo…[Read more]

Hi Not so Lucky,I'm assuming your $53k deductions is made of your figures of $25k interest + $10k bills+ $18K "negative gearing"Firstly, the $25k interest sounds a little high for $400k property.  You'd be lucky to get a loan with 95% LVR so I;m assuming a LVR of 90% on the $400k loan with 6% interest rate.  This gives you 90% x $400,000 x 6% = $…[Read more]

I haven't seen a specific amount or percentage that could apply if you overestimate your deductions.But I have seen on the variation form that if you lodge a variation and you end up with a tax liability (as opposed to a tax refund), the ATO reserves the right to NOT allow you to lodge a variation form for the following tax year.  So they can p…[Read more]

Rambo,Renting it out in the first 6 months would be a big mistake!1.  You will breach the rules of the FHOG and could be asked to cough up the $24k back if you are unlucky enough to be audited.2.  You will lose the eligibility for the 6 year CGT main residence absence rule (and have to end up paying CGT when you eventually sell the IP).  The ex…[Read more]

Also in the first tax return, you can claim strata, water rates and council rates you would have paid to the vendor on settlement of the IP.  The settlement letter will show the amounts you can claim in the 1st year tax return.With regards to claiming depreciation of building and fittings, they are certainly deductible during the years of…[Read more]

Ptykit,A valuer can provide a backdated valuation – thats not a problem.Based on the info provided so far, it sounds like you might be able to apply the 6 year CGT absence exemption rule (provided you haven't purchased another property while owning this property).  In that case, you can sell in 2010 CGT free and a backdated valuation is not…[Read more]

I'd also be careful of the Land Tax implications.You may cop a land tax assessment (i.e losing the main residence land tax exemption to some extent) due to claiming occupancy home office costs in the tax return.The ATO and Office of State Revenue do sometimes corroborate taxpayer's information. So consider both the CGT and Land Tax implications…[Read more]

Kvkr,Any decent Quantity Surveyor can knock up a report for you that summarises how much you may claim each financial year.It will cost you approx $500 and the cost of the report is tax deductible as well

Hi Dacloud,The rent looks pretty healthy for a $350k price and strata is reasonable at $500/qtr.Some other things to consider is how much money is in the sinking fund and if there have been numerousmaintenance jobs done to the units in the building.  If there is a history of maintenance work required in theunits, then it's not a good sign. The…[Read more]