All Topics / Help Needed! / am I able to negatively gear?????

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  • Profile photo of RowesterRowester
    Member
    @rowester
    Join Date: 2006
    Post Count: 19
    October 23, 2007 - 10:56 pm

    Hi,

    I am a first home buyer. I am borrowing $400k and have my eyes on a 1 bedder with the potential to turn into a 2 bedder.

    To be eligible for the FHOG, I need to live in the property for a 6 month period, which needs to commence during the first 12 months. my plan is to move in during month 11. For the first 11 months, i will rent out the property.

    During this 11 month period, is the property classed as an investment? So can I negatively gear it/ claim expenses etc? If so, should I make sure that all items needed to buy for the reno should be bought during this period?

    My intention is to rennovate during the 6 months I live in it, revalue, and hopefully have enough equity to purchase a second property. I am going with AMP loans as they are able to refinance upto 100%.

    Thanks for your help.

    Ian

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213
    October 23, 2007 - 11:46 pm

    Why not live in it from day 1 – this will establish it as your main residence. Once it is your main residence you can then move out and negatively gear and be exempt for CGT for up to 6 years while not living in it. s 118-145 of the ITAA 1997.

    If you do what you say, then you will be liable for CGT for any growth during the first 11 months (which may not be much), but you will also be able to negatively gear, or claim all expenses associated with it during this period it is rented.

    It doesn't really matter when you buy the stuff to renovate as if you are living in it you will no longer be able to claim things. If you do renovate early on, you may be able to claim depreciation for a short period. If you are repairing things to the state they were when you purchased it you may be able to claim in full – for certain items. If the work is classed as capital repairs then you can generally only claim a small portion each year.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

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