Hi all,
I’m a newbie, and have a simple question. My partner and I just bought a house with an aim to live there for 4-5yrs, then move on to a better place whilst retaining the first property.
Is it possible to convert the first property into a rental (and claim the various deductions) like you can elsewhere in the world, or do I have to sell it and buy something else? A friend told me NO deductions are permitted on a rental that was my PPOR….
Hi KK, your friend is so wrong. Your PPoR can certainly be rented out after you convert it to an IP (and all expenses will be deductable). There are quite a few posts on this theme. Probably the most useful tip I could give you would be to preserve the principal of your loan while it’s your PPoR, by having an Interest Only loan together with an offset account. Do all your saving in the offset account, so that your full loan principal is retained when it becomes tax deductible debt when the property becomes an IP. This is much better than ending up with a small loan for the first property, and then having to get another large non deductible loan for the new PPoR.
Jim.Doogs,
Hit the nail right on the head there my friend!
Cheers,
Simon Macks
Mortgage Hunter
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Hi
I made the mistake of paying cash for my 1st IP, where I should have kept the max has principle, so at least I could have claimed the interest as a tax deduction. I found out at the end of year when tax time came. Doogs definately 100% right.
Keith
Hmmm… conflicting views on this after a quick search of the forum:
https://www.propertyinvesting.com/forum/topic.asp?TOPIC_ID=2758
Some say *no* claims allowable at all if the PPOR is converted to an IP (as told to them by accountants), others say no problems at all. What is the story? Are *all* the same deductions allowable (ie. rental costs, maintennance, building depreciation, interest), some, or none at all?
Hi KK, I checked that thread, and realised that I didn’t answer properly in the last post when I said “That’s all very correct Snow.” I must not have read it properly, ie the bit about the old ppor not being deductable when it became an IP.
All that I can say is that I’ve asked my accountant and he assures me that all expenses become deductable, including the interest on your loan, provided you haven’t bumped it up by refinancing. The deductibility of your loan has been confirmed by Noel Whittaker on at least three occasions in the Sunday Mail 27Apr03, 15Sep02 and 17Nov02. (I’ve still got copies of the articles)
Fittings and the building depreciation would also be deductable, but you would probably have to get a Q/S report to establish the value of these at the time of transfer to an IP.
I find it difficult to believe that accountants would be saying otherwise. Perhaps the circumstances were different. Where are all the beancounters in this forum?
Sorry Snowdog6, I should have read more carefully!
Jim.
The topic ‘renting out your previous PPOR’ is closed to new replies.
