Follow the links on my website to your state’s authority on the FHOG.

As far as the CGT exemption goes you can search on the ATO site and find something like this (sorry can’t paste the URL):

Treating a dwelling as your main residence after you move out

Printable version

As a general rule, a dwelling is no longer your main residence once you stop living in it. However, in some cases you can choose to have a dwelling treated as your main residence for capital gains tax (CGT) purposes even though you no longer live in it.

You cannot make this choice for a dwelling before you first occupy it as your main residence.

Example

Not main residence until you move in

Therese bought a house and rented it out immediately. Later she stopped renting it out and moved in.

Therese cannot choose to treat the house as her main residence during the period she was absent under the continuing main residence rule because the house was not her main residence before she rented it out. She will only be entitled to a part exemption if she sells the dwelling.

When you can make this choice

This choice needs to be made only for the income year that the CGT event happens to the dwelling – for example, the year that you enter into a contract to sell it. If you make this choice, you cannot treat any other dwelling as your main residence for that period (except for a limited time if you are changing main residences).

If you do not use it to produce income, you can treat the dwelling as your main residence for an unlimited period after you cease living in it.

Example

Bill buys a unit and lives in it for three years. He then moves out to live with a friend, while his son occupies the unit rent free. He does not treat any other dwelling as his main residence. Twelve years later, he sells the unit and claims main residence exemption from CGT.

If you do use it to produce income, you can choose to treat it as your main residence while you use it for that purpose for up to six years after you cease living in it. You are entitled to another maximum period of six years each time the dwelling again becomes, and then ceases to be, your main residence. If, as a result of you making this choice, the dwelling is fully exempt, the home first used to produce income rule does not apply.

If you are absent more than once during the period you own the home, the six year maximum period that you can treat it as your main residence while you use it to produce income applies separately to each period of absence.

Example

One period of absence of 10 years

Home ceases to be the main residence and is used to produce income for six years

Lisa buys a house after 20 September 1985 and lives in it for two years. 10 years after she stops living in it, she sells it. During this period, she rents it out for six years and leaves it vacant for four years.

Lisa chooses to treat the dwelling as her main residence for the period after she ceased living in it, so any capital gain or capital loss she makes on the sale of the dwelling is disregarded. The maximum period the dwelling can continue to be her main residence while it is used to produce income is six years. However, while the house is vacant, the period is unlimited, which means the exemption applies for the whole 10 years. It doesn’t matter whether the period during which the home is used to produce income is a single block of six years or several shorter periods, so long as the total period it was used to produce income was no more than six years.

Because the dwelling is fully exempt as a result of Lisa making this choice, the home first used to produce income rule does not apply.

Example

Home ceases to be the main residence and is used to produce income for more than six years during a single period of absence

1 July 1990

Ian bought a home in Sydney and used it as his main residence.

1 January 1992

Ian was posted, by his employer, to Brisbane and bought another home there.

1 January 1992 to 31 December 1996

Ian rented out his Sydney home during the period he was posted to Brisbane.

31 December 1996

Ian sold his Brisbane home and the tenant in his Sydney home left.

The period of five years from 1992 to 1996 is the first period the Sydney home was used to produce income for the purpose of the six-year test.

1 January 1997

Ian was posted by his employer from Brisbane to Melbourne for three years and bought a home in Melbourne. He did not return to his Sydney home.

1 March 1997

Ian again rented out his Sydney home – this time for two years.

28 February 1999

The tenant of his Sydney home left.

The period of two years from 1997 to 1999 is the second period the Sydney home was used to produce income under the six-year test.

31 December 1999

Ian sold his home in Melbourne.

31 December 2000

Ian returned to his home in Sydney and it again became his main residence.

28 February 2003

Ian sold his Sydney home.

Ian chooses to treat the Sydney home as his main residence for the period after he ceased living in it. The effect of making this choice is that any capital gains Ian made on the sale of both his Brisbane home in 1996–97 and his Melbourne home in 1999–2000 are not exempt.

Ian cannot obtain the main residence exemption for the whole period of ownership of the Sydney home because the combined periods it was used to produce income (1 January 1992 to 31 December 1996 and 1 March 1997 to 28 February 1999) total more than six years.

As a result, the Sydney house is not exempt for the period it was used to produce income that exceeds the six-year period; that is, one year.

If the capital gain on the disposal of the Sydney home is $50,000, the amount of the gain that is taxable is calculated as follows:

Period of ownership of the Sydney home:

1 July 1990 to 28 February 2003

4,626 days

Periods the Sydney home was used to produce income after Ian ceased living in it:

1 January 1992 to 31 December 1996

1,827 days

1 March 1997 to 28 February 1999

730 days

2,557 days

First six years the Sydney home was used to produce income:

1 January 1992 to 31 December 1996

1,827 days

1 March 1997 to 28 February 1998

365 days

2,192 days

Income producing for more than six years after Ian ceased living in it:

365 days

Proportion of capital gain taxable in 2002–03

$50,000 X

365
4,626

= $3,945

Because Ian entered into the contract to acquire the house before 11.45am (by legal time in the ACT) on 21 September 1999 and entered into the contract to sell it after that time, and owned it for at least 12 months, he can use either the indexation or the discount method to calculate his capital gain.

Note: 21 August 1996 important
The home first used to produce income rule does not apply because the home was used by Ian to produce income before 21 August 1996.

hope this helps,

Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985

Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

Ruth,

This is the high risk end of town. I personally have seen people lose big money here.

I can think of much safer ways to invest.

Cheers,

Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985

Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

Two of the rooms have phone lines. One was there and the other has been installed by the tenant.

There is a wireless modem that I bought and the five people share an ADSL account together.

I paid line rental last year but was never reimbursed enough for calls so this year I gave it to them to run.

And no, I have no trouble flling it – could have filled three a tthe beginning of the year.

Cheers,

Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985

Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

From family?

I think you will find it a little tricky finding a pos cashflow property in Perth.

Best of luck,

Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985

Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

I suggest you talk to a broker for some free financial guidance.

What does Destiny offer in this report?

Cash flow property with prospects for CG are getting harder and harder to find at that price. Depending on your income you may be able to borrow more.

Cheers,

Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985

Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

Much the same.

If you follow the links under FHOG on my website you will see all of the States Websites dealing with the FHOG which you can check.

Cheers,

Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985

Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

Do both partners agree that the split should be calculated on both initial investment and the additional money A spent?

Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985

Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

Your offset account can be any other account that you nominate – usually your saving account. Some businesspeople with good cashflow even combine the offset with their business account to save considerable interest on the home loan and reduce the taxable income of the business by not earning any interest on the bank account.

Does this help?

Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 75% LVR***
[email protected]
0425 228 985

Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

Do you mean that you are considering a motel or buying a unit in a serviced apartment setup?

Cheers,

Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 75% LVR***
[email protected]
0425 228 985

Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

I cannot see any problems with your plan.

Of course your room mates are just contributing to the expenses of the place – not actually paying you rent which you will need to declare etc

Cheers,

Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 75% LVR***
[email protected]
0425 228 985

Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.