Hi All,
I’m curious as to whether it would be ok to rent out a PPoR, not sure if there were any legal implications, how would it be seen by ATO?
How would one protect oneself, say if a tenant injured themselves and sued against me? I’m thinking trusts. Listening from Kiyosaki, he mentions operating within a Corporation, where one earns money via businesses, property etc. and one spends all they can and then taxed on what’s left.
Are there other avenues I haven’t explored?
hi techhowse
renting out your PRoR is no different to any other property.From a tax point of view, it stops being your PRoR from the day you signed up the tenants. If you sell it, it is subject to CGT during the time it was used as an investment property.
If you havn’t bought it in a trust, now is probably not the time to do it, you would be subject to stamp duty if you transfer a property into a trust after it had been purchased in your individaul name. sometimes its not worth it.
This is based on the advice I have been given for my own properties in the past, I am not an accountant. Need to get your own advice related to your own circumstances!
X
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phone 0412 437 582Just one piece of info I picked up on this forum earlier (which I’m happy to pass on) is that if your don’t immediately buy another place (i.e. go rent a place) then this one will remain your PPOR for tax purposes. Check with your accountant about the 7 year rule for CGT.
When we moved towns we rented out our old place, and moved into a rental place at the new town. When we eventually sold the old place after 3 years, there was no CGT as it was still deemed to be our PPOR.
However if you do buy another place then the rented one will stop being your PPOR.
As for your other points. Landlords insurance (which I think is a must but some more experienced investors here debate it’s need) will cover a set amount of public liability (usually around 1$mil). Trusts and companies are another matter, to do with the way you hold your assets and are worth looking into BEFORE you do anything. Have a look at the financial forum here at property investing. There’s a lot of information. Mr McKnight also has a product called WealthGuardian that covers trusts structures and the like which I found very easy to follow (and I’m a rank novice).
Some points.
PPOR when rented becomes an IP. No problems there with the ATO or anyone else.
You get a 6 year CGT exemption when you start renting it. If you sell within 6 years you don’t pay tax on any profit.
If you buy another home this is then stopped as you can only have an exemption on one home at a time.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
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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.
thanks to all for the contribution,
I forgot to add one, (almost crucial) thing: Whilst the tenants are renting, the house will remain my PPoR. So in other words, the tenants and I will be living in the same house.
I’m guessing the tax and legal structures would be different? Would it be possible to buy landlord’s insurance for this situation?Yup, no doubt, gotta speak to my accountant about this, but just wanted to ask around.
Also for the Kiyosaki thing (didn’t quite finish the sentance), is operating within a corporation only available to those in the US? perhaps we have it here, but under another name?
Fast Reply-
You will have to apportion everything come tax time in regards to tenants and yourself.How many tenants, how many rooms etc..and ensure you do it all ‘correctly’ IMO.
If its your PPoR it’s going to be expensive to now put in a trust and maybe not worthwhile, insurance would be though..
Are you collecting rents etc yourself, do you know the tenants well..all things you need to look at
REDWING“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorOriginally posted by techhowse:Are there other avenues I haven’t explored?
Have You read Dale GatherumGoss’s books?
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorYou may lose all or part of your CGT exemption if you are creating an income from the property while living in it. I beleive the 6 year rule cannot apply in this situation.
Please speak to a good accountant before you do anything.
Terryw
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