I am about to purchase a property currently tenanted to October 2007. After this I plan to move in. Before I move in I plan to build a carport and fence, so it would be nice to be able to claim some of this but dont know if that is going to be realistic…
I’m not sure of the best way to go.
Do I set it up as a PPOR (and from what I understand there is a chance I may be able to avoid CGT given the short timeframe before I move in, but I assume I will have limited ability to claim anything).Or do I set it up as an IP and have some ability to claim costs but also have CGT.
There is a small chance i would keep renting it out after October but most likely I will move in.
And are there any other legal / taxation issues that i am missing??
Hopefully this is as easy for someone to answer as it is confusing to me! [biggrin]
You could treat the property as your PPoR from settlement day and not claim any costs etc as tax deductions, then you will never be liable for cgt as this is only charged on income producing assets.
This also means you would probably have to pay tax on the rent, or not declare it – not a good idea.If you plan to keep this property for a long time, the cgt is going to be negligible as you will only pay cgt on the time it was used as an income producing property which will be less than 12 months.
Don’t forget – you will only be paying tax on half the gain, and that tax is applied to your overall tax position anyway, so in fact could be very small.
Also, by the time you sell down the track, the dollar will have depreciated some more, so your cgt will be relatively small in tomorrow’s dollars.May I suggest you set it up as an I.P from day one, claim all your costs as you would normally and forget about the cgt. You will only be paying it if and when you sell.
Of course, consult with your accountant ont this issue.
Cheers,
Marc.
[email protected]I believe that you can still class a place as your main residence without living in it straight away as long as you move into it as soon as practical after purchase. Not sure if having existing tenants complete their lease would enable you to claim it as your main residence from day 1 of settlement, but it might.
I think it is a very good idea to claim a place as your main residence if you qualify. CGT can be a huge expense a few years down the track. You may not intend to sell, but circumstances change.
If you want to build a carport and fence, you could claim this while renting the property out, but you will only be able to claim depreciation of the costs of both. You cannot claim the whole cost. So if you are only renting it for a short time, the tax savings may only amount to a few dollars. eg. carport cost $5000, 2.5% of this is $125. Max tax saved would be about $62 if the property rented for a whole year.
(This may be incorrect as I am not an accountant).
Terryw
Discover Home Loans
Parramatta
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