Just thinking of some ways to invest.
At current I live at home with my mum. In a rented property. We are currently not happy where we are. I want to buy a house and as I have never brought a house before am eligible for FHOG (I’m in Vic btw). So am I able ot buy a house as an IP for the long term, but in the short term (say 2-3 years) i am living in with my mum and getting rent off her – making up the difference myself. And when it comes tax time is the extra I have put in throughout the year tax deductible as it is an IP but I am living there still?
Like for example, the mortgage is $1,000 a month, am receiving rent of $800 a month, so I am putting in $200 – is that $200 tax deductible as well as interest? Or not allowed as Im residing there. Thanks in advance, am stuck on this one and not sure where to look to find out!i dont think so loungeact! the fact that you are residing there (your’re charging your mum rent ????????) makes its youre ppor.
Loungeact,
You want to invest.
I would treat the house as my PPOR.
You would be miles in front over the long run if it is your PPOR…sure there would be no tax deductions but no CGT and $800 pm from Mum.Ps you may be able to get a better interest rate too.
Good luck
hrm
I have refrained from posting until now as I am amazed that anyone would charge their mother rent!!!!!!!!!
Maybe she should bill you for having to give birth to you, the changes to her body, feeding you, educating you, looking after you for years, etc…
Why don’t you buy it with her so she owns something as well?
The Mortgage Adviser
http://www.themortgageadviser.com.au
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Essential LinksI wouldn’t have thought of it as “charging mum rent” so much as having my mum as a flat mate and sharing the bills as family members who are supportive of each other do.
Living costs money and as a family it is advantagous to share those costs however may seem appropriate. Once I was working and living at home I paid rent, before then I helped out around the house where I could. It’s what family does.
Anyway the question at hand:
You’ve got two ways you can go.
1. “Charge mum rent” In this case you can claim a fair proportion of the interest costs as a tax deduction. IE if the renter has use of 50% of the porperty (as would be the case) then you could fairly claim 50% of the interest cost against tax. You could also claim 50% of the depreciation of those chattels used to maintain your property in rentable condition. You would need to get your mum to sign a lease and lodge bond so everything would be hunky-dorey with the ATO. The downside is that you would only be able to claim 50% as your PPOR when it comes time to sell as regards capital gains. However if you are not really planning to sell it doesn’t matter.2. Have mum help out with the cost of owning the property and keeping it in top shape. You wouldn’t be able to claim any costs against tax, but on the other hand you would get the benefit of not paying CGT.
In either case since it is your PPOR you could get the FHOG.
Personally to keep matters simple (personally and financially) I’d take option 2 and just come to an arrangement with mum to help out with the costs of keeping the place. That would mean no hassle from the ATO, no leases or bonds, no extra tax time paper-work and no future arguments concerning leases and so on if you mum decides to move out into her own “mum-pad” in the city [biggrin]
Option 2 sounds more appropriate. Granted that kids pay rent to parents etc, but this is your mother. Don’t particularly want to stand the moral high ground here, but it sounds a bit stingy to me having to ask you mum to live in your house. Anyway, i guess if shes happy then whatever you do I’m sure it will be ok.
I think a few of you were pretty qiuck to jump the gun there. Maybe i just didnt explain myself too well. But Surreyhughes got it right. Of course I would ask my Mum to buy the house as well with me, but she cant afford it. She’s a single parent & only a part time worker, with no assests AT all other thana cheapish car. At the moment we have cheap rent off a relative but we dont want to live here anymore. If we move somewhere else to rent, of course the rent has to be higher, and its not really possible to do because once I move out of home with my mother then she has no way of being able to pay that rent by herself. But if I buy a home, and she rents it off me for under market value, and then I pick up the rest, I dont see that as a bad thing. I dont mean to sound offensive or anything, but as nice as it would be for me to be in the financial position to buy a hosue for someone just to help them out and live in it for FREE and NOT charge rent then of course I would do it, but serious what 20 year old can do that? We both only work 3 days a week.
I agree. Lets not be too quick to judge people here folks. Hop off our high moral horses for a minute and try some helpful advice.
Cheers,
Simon Macks
Finance Broker
[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.
I congratulate you & your Mum for the lateral thinking you have applied. Personally I would keep it as you personal Residence then there is no worries about CGT then you will be able to upgrade when the time arises with no tax to worry about. Maybe you should speak to your accountant & he/she may have point you in the right direction before you start investing further.[cap]
NickyDoes Mum receive some sort of rental subsidy from Centrelink which has a bearing on your planning—-
At the moment she does receive rent assistance towards where we are staying. But she wants to cut ties with Centrelink and gain an extra shift (shes not really receiving that much money off Centrelink at the moment, to be worth putting up with all their hassles, letters, phone calls, appointments, etc.)
I hardly think 800/200 is a fair split for someone on centrelink benefits who does not get their name on title and especially being your mother!!!
Paying rent to parents is a long way from parents paying kids. Not many parents charge their kids any rent and, when they do, it is usually ‘board’ and they get a lot more for their money than if they moved out. It certainly would not be a 800/200 split.
In any case, parents tend to earn less as they start to approach retirement age. Your mother should be winding down and relaxing more instead of having to take on additional shifts to pay you rent.
The Mortgage Adviser
http://www.themortgageadviser.com.au
[email protected]
Essential LinksIn addition to my comments, I am only appauled because you will be living there with your mother. If she lived there alone, that is a completely different story. Personally, I would never charge an immediate family member any rent in any situation.
The Mortgage Adviser
http://www.themortgageadviser.com.au
[email protected]
Essential LinksI applaud you trying to make you and your mum’s life that bit better. Have a similar problem myself to try and sort out. Don’t forget in these situations to consider wills and power of attorney so if anything happens to you, mum’s ok. (Sorry about the depressing ending)
Richteddy
TheMortgageAdviser you have jumped to conclusions again, I said “for example”. These are not the figures, and the actual figures are more like I keep the rent the same as what she is paying now ($125 a week) and I pick up the rest, of approximately a high 190k property, so therefore my share is going to be larger anyway that I have to pay
I believe the difference you pay is not claimable and there are rules in regards to renting to family members,so if I was you I would discuss this issue with an accountant.
BJTarbotton
Rob said:
“In any case, parents tend to earn less as they start to approach retirement age. Your mother should be winding down and relaxing more…”
Rob, the lad is only 20- his mum might be not yet 40 (I’m 39) Don’t write her off as as a retiree yet! 40 is the new 30, after all.
Loungeact, I have no knowledge of the legality, but perhaps had you said your mum and you co-rent, and the house is in your name, it would have caused less assumptions. It sounds like you are both adults and can work out your own arrangements as to renting together. I don’t really see an ethical problem with two lower income adults living together- despite their familial ties. The legality of it is something other people will be able to determine better (like your solicitor, for example?)
kay henry
loungeact,
I am only new to all of this but if you and your mother have a small income why not join forces and buy a house together you can still apply for FHOG just have house in your name but loan in both names. double check that incase application has changed.then you can continue maybe with IP.Why not involve her instead of charging her as I am guessing as a mother she would include you.She must b a good mother at that mine,would of stopped talking to me, even if i just toyed with the idea of charging her for anythingviewing earlier discusion…my question is that there must be a clear difference between charging someone rent and sharing purchase costs?
Originally posted by kay henry:Rob, the lad is only 20- his mum might be not yet 40 (I’m 39) Don’t write her off as as a retiree yet! 40 is the new 30, after all.
So will 50 be the new 40 when you are 49???
))I apologise if I jumped to conclusions but, when I see welfare, I tend to think the worst. Put the house in both your names and let your mother own something as well!!!!
The Mortgage Adviser
http://www.themortgageadviser.com.au
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