My spouse and I are first home buyers, and we’ve found an apartment which we like in Melbourne. We will be receiving the First Home Owners Grant in Victoria. This apartment is currently under lease until Dec 2005, which is fine with us – we can move in in December and still satisfy the requirements of the FHOG (from what I understand). My question is, over the next 6 months, when we will be receiving rent from the current tenants, is our apartment considered an investment property – is the interest we pay on the loan and the outgoings we will be paying (body corporate, rates, etc.) tax deductable? I’m unsure if you can claim tax deductions on a property which you are using the FHOG to purchase? After 6 months and the lease is up, we will be moving in, and obviously then it will be our PPOR so I know we can’t claim anything then, but I am unsure about the first 6 months. Thanks for your help with this!
Cheers,
JenHi Jen,
The FHOG passed me by many years ago so please take what I say with a grain of salt.
As the property will still qualify as an IP for the 6 months or so that it is rented you will be able to claim the costs outlined in your initial question.
Be aware that expenses such as rates, body corporate fees, insurance etc will be apportioned over the period of time that the property is an IP – you will not be able to claim a full year of rates for example.
Derek
[email protected]
http://www.pis.theinvestorsclub.com.au
0409 882 958Thanks Derek,
Do you know if that also applies to depreciation of the property?
Cheers,
JenHi Jen,
There are two aspects to depreciation.
Plant and equipment (all the goodies inside the building) – some of these may be 100% depreciable if they fall into the low asset pool. Others will have a depreciable life that extends beyond the 6 month period – I assume these will be apportioned too.
Capital depreciation (the buildings) will be apportioned over the part of the year that the property is an IP.
Will move this thread to legal and accounting.
Derek
[email protected]
http://www.pis.theinvestorsclub.com.au
0409 882 958While the property is an investment you should be able to claim all costs associated with it including interest, depreciation etc.
But you will not be able to claim it as your main residence until you move in, and this will mean it will be subject to CGT (if any gains!!) during this period, if you sell.Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]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
Thanks for all the help!!
Am I right in assuming then that: I can use the FHOG to purchase a property, (rent it out for the first 6 months, live in it the follow 6 months or longer) and initially be able to consider it an investment property – i.e. if settlement occurs before June 30th of this year, we can claim those deductions I previously talked about on this tax return?
Cheers, Jen
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