Hi,
We are currently living in our first home for 5 years. We have received First home buyers grant (NSW) when purchased this property.
Now we are thinking to move to another city. Is it possible to rent out the current property and use it as investment property (negative gearing)?
Thanks for any advice.
Yes.
You will also be exempt from CGT for a 6 year period as long as you do not buy another home.
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[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.
Thanks Simon for your prompt response [thumbsup2]
>You will also be exempt from CGT for a 6 year period as long as you do not buy another home.
I am new to this investment idea so forgive me if my questions seems very stupid:
– Are you saying, I will get exempt from Capital Gain tax for 6 years for the current residential home when I will sell with profit.
– What will happen, if we buy another property in future (although slim chances)?
– Do we have to pay any tax or return first home grant to convert this residential property to investment property?
– Is there any trap we should beaware.
– Do you know where can I get more information (web link, etc) about switching from residential home to investment property?
Regards,
MAOriginally posted by Mortgage Hunter:Yes.
You will also be exempt from CGT for a 6 year period as long as you do not buy another home.
Hi Simon,
I’m assuming you meant “not buy another house to live in”? I assume its ok to buy other properties during this period to rent out, as long as you do not claim them to be your PPOR. Is this correct?
Regards,
OziYou can only claim one place as your PPOR at one time (except for a period of 6 months were you can have two to take into account the overlap between selling and purchase).
If someone is going to buy a new house to live in, they can chose which one to claim – usually the one that is growing the fastest.
if you are renting your property, the costs associated with it, icluding interest, can be offset against any income received.
Terryw
Discover Home Loans
Parramatta
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Originally posted by MA_NSW:Thanks Simon for your prompt response [thumbsup2]
>You will also be exempt from CGT for a 6 year period as long as you do not buy another home.
I am new to this investment idea so forgive me if my questions seems very stupid:
– Are you saying, I will get exempt from Capital Gain tax for 6 years for the current residential home when I will sell with profit.
– What will happen, if we buy another property in future (although slim chances)?
– Do we have to pay any tax or return first home grant to convert this residential property to investment property?
– Is there any trap we should beaware.
– Do you know where can I get more information (web link, etc) about switching from residential home to investment property?
Regards,
MAYou don’t actually do anything to change from a PPOR to IP. Just move out, start renting and maintain records. Include the income and expenses in your tax return.
FHOG is yours as long as you have lived in the property for more than 6 months.
If you buy another IP nothing happens. If you buy a home then you only get the CGT exemption on one property.
Hope this helps
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[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.
Lets assume you move out of your PPOR, and later buy another property to live in. Do you HAVE to change PPOR status to the recently purchased property or can you leave it with the original one for the 6 years? Following on from this, can you live in a property you own without calling it you PPOR and move your PPOR status from one reno property to the next as they are bought and sold?
Clarity would be great.
ThanksNothing needs to be changed or adressed until an assett is sold and CGT needs to be paid. This is decision time.
Of course if you never sell then the whole concept is moot.
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[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.
Hi Simon,
Sorry I dont think I was very clear. I was particularly refering to a buy reno sell situation or a buy build sell situation.
Lets say you own and live in A whilst reno and sell B. If you plan not to use PPOR status on A (not predicting as much growth if sold, or future hold and rent), can you claim the PPOR CGT exemption on B? If so can this be reproduced with subsequent properties, understanding only one exemption at a time. ie sell B, buy C repeat reno or build and sell, buy D etc.
Is this possible?
Theoretically possible, but if you are conducting it in a business like manner, then you cannot claim the proeprties as your PPOR (or get the tax exemptions) – or you are not supposed to. You may get away with a few though.
But if you were to claim B as your main residence, then you will lose the exemption on your main one for the same period.
Terryw
Discover Home Loans
Parramatta
[email protected]
Sign up to my mailing list.
Just send me a blank email, with “subscribe†in subject line.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 you all for your comments.
I am trying to get an estimate of tax return based on the negative gearing:
– Our mortgare now $274000 (purchased $300000, Living in 5 years)
– Repayment per month: ($1900)
– Estimate rental cost (council, strata, etc) p/month ($300)
– Estimate rental income p/month: $900
Total deficit: ($1300)I pay around $15000 tax per year, Can you estimate the proportion of tax I can claim as negative gearing. An estimate will be preferable.
This property is joint name (myself & wife). My wife works p/t now. Can I claim the deficit from my tax return?
Thanks in advance
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