Ah, so much to do, so little time! (So much to learn, so little grey matter![blink])
Can any one tell me the pros and cons of living in an IP before renting it out?
If I buy a property as an IP, but live in it for 6 months to do it up before I rent it out, is it just treated as an IP, or is it treated as my PPOR?
If I living in it as I do it up, can I claim the expenses on my tax?
Anything else I need to consider with this scenario?
Have a great day.
Cheers
Kez
It may have beneificial tax beenfits are you could claim it as your main residence while renting it out for a period of up to 6 years, as long as you do not claim any other property as your main residence.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
Click below to email meTerryw | 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
See, there’s the rub. What I plan to do (once I have gotten to a point I can give up full time work), is to buy a doer upper, live in it while I do it up, then do it all again with another one.
So, (if all goes to plan) I would be only living in each place for 6 – 9 months, and then moving on. Would I change each to my PPOR when I moved in, or start a business and personally rent the property from the business, or somehow have living in the house as a perk of the business, or what? I got no idea of how it would work.
Cheers
Kez
You can only have one main residence, so even it you are moving around between properties, only one will get the benefit of being classed as your main residence. When you moved onto a new one, you could claim that as your main residence, but you will lose the main residence on the first one.
I don’t see the point in starting a business, and renting it to the business. You cannot rent to yourself, but you could possible claim a portion of the interest if you are using the place for business purposes. If you form a company or trust, then these could rent it and claim the rent, but the owner of the house would have to declare the rent as income.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
Click below to email meTerryw | 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
If you are selling within 12 months, I would be using a company and capping the CGT at 30%.
When I grow up, I want to be a storm trooper!
What about a Discretionary trust? Then you would have the option of distributing the profit to beneficaries on lower tax brackets first, and then sending it to your company as a last resort.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
Click below to email meTerryw | 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
After doing some reading, I actually have an idea of forming a couple of companies. One would be the working company (ei. Kerris Renos Pty Ltd), and would not own any of the properties. Another would be the company that owns the properties (ie. Kerris Holding Pty Ltd). And then there would be me, who owns nothing, but works for Kerris Renos, doing up houses owned by Kerris Holdings. If I was living in the house owned by Kerris Holdings, I would just be a tenant, wouldn’t I? And wouldn’t all expenses incurred by Kerris Renos in the course of carrying out business be a tax deduction? Couldn’t I then just draw a wage from Kerris Renos or something, keeping it under the tax free thresh hold to avoid personal income tax?
Does any of that make sense to anyone?[blink]
Kez
A TRADING company is a good idea.
When I grow up, I want to be a storm trooper!
Is a trading company one that buys and sells the properties?
Kez
Kerrie
Yes, starting to make sense. But if your draw a wage of only $6000 pa, how are you going to afford to pay your rent?
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
Click below to email meTerryw | 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
Kez, have a chat to an accountant. May I suggest Mark Unwin?
He can be contacted at [email protected]
He is doing my structure as we speak and it sounds very similar to what you want to do.
When I grow up, I want to be a storm trooper!
The rent … well, I was thinking that maybe Kerris Holdings might supply the house as some sort of tax free employee benefit. Not sure how, but there’s gotta be a way to do it … just gotta find it[biggrin]
Mortgage Wizard … ummm …. Advisor … ummmm …. the storm trooper [tongue4] … good idea. I might drop him and email. Have you got a ball park figure of how much it would cost to set up something like that?
Cheers
Kez
$2,000 is his standard for a corporate trustee and trust structure.
_____________________________________________
The poster formally known as The Mortgage Adviser
When I grow up, I want to be a Storm Trooper!
There are very few “tax free employee benefits” these days. The introduction of the Fringe Benefits Tax System (back in mid 1980’s)saw to that.
What you are suggesting re: the free rent is caught by the Fringe Benefits rules.This would effectively double the price of the ‘rent’, whereas, say, paying a salary sufficient to cover the net rent would be a much cheaper (aka tax saving) alternative.
Also, if you do lotsa ‘move in, renovate, sell’ activities then you could be deemed to be ‘in that business’ and taxed on the profits accordingly.
Prepare a Plan for, say, the next 12 months. Can I then suggest that you appoint a good accountant to your team before you go too much further down the track – then have a good chat with them.
Yes it will cost you but it should be viewed as ‘a good investment’ in itself. It’ll help to clarify your thinking and save you falling into some serious tax traps.
Don’t want to find that you’ve shot yourself in the foot.
[blush2]
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