Hi All
This is a bit of a long winded situation but I just wanted some advice on something, so here goes….
I am 24 and am in the process of settling on my first property purchase. I bought it off my parents through a transfer of ownership.
My parents are currently constructing their new home. In the meantime, my whole family will continue to live in my property until the new house is complete (it is expected to finish within about 6 months) then we will all move over to the new house (including myself) and my property will convert to an investment property.
I have applied for the FHOG and stamp duty exemption since I will be living in the property for at least the next 6 months and wanted to take advantage of it now.
The loan is $290K at interest rate of 6.67% and I am on the 42% tax bracket. The entire house could probably be rented out for $230.
I dont want to have to wait for 6 months to claim tax deductions on my interest payments.
My question is if I rent 2 out of 4 bedrooms in my place to my family, then I technically could claim half of my interest payments and outgoings associated with the property.
Everything is legit and I will be living in the property. I’ve read through the fine print and the conditions of the the FHOG doesn’t specify you can’t rent out part of your property.
If I do this will I put my FHOG and stamp duty exemption at risk? I dont want to get in trouble from any government bodies, especially the ATO.
I’d really appreciate any thoughts on this arrangement.
Thanks!
You are certainly correct about this situation not being excluded in the FHOG documentation, but I would be calling the FHOG experts themselves. I have never heard of anyone getting in trouble for doing what you suggested.
Robert Bou-Hamdan
Mortgage AdviserThanks for the prompt reply!
Having read the FHOG application I also don’t see any problems with your way of claiming $7,000.
As long as one of the owners of the property lives there for continuous period of 6 months commencing within 12 months of settlement, you should be entitled to the grant.
Hi Kit Kat
You would also have to declare the rent as income and be prepared to defend an accusation that the whole arrangement was not contrived just to gain a deduction- which it does appear to be.
As for the FHOG itself, if your parents provided financial assistance you need to be very careful about disqualifying arrangements.
As the Mortgage Advisor says, I would suggest you seek advice from the FHOG experts. I think you need that for the tax as well- might work out, but only if you are VERY careful about how you do it.
CheersHi Kit Kat,
I would suggest speaking to your accountant first of all.
Without knowing your full situation some general advice is that you may be better treating any payments from your family as board meaning it is tax free and probably won’t affect your FHOG. Again best to check with FHOG. Saying that as it is tax free you cannot claim your expenses off your tax. However as it is your Principle Place of Residence for the first six months and when you move you won’t be having another principle place of residence you will be able to access the 6 year capital gain exemption. This will normally be of more value then 6 months of negative gearing.
As i said this is general advice please seek the advice of your accountant before acting on any advice herewith.
Carlyle Cousins
Incentive Business Accountants
http://www.incentiveaccountants.com.au
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