G,Day everyone
Just inquiring into the implications of renting out part of my PPOR. My house is set up like a duplex with three bedrooms on the side that we live on with a two bedroom self contained granny flat attached. I Have my brother boarding there at the moment paying in cash. He recently became unemployed and was talking to me about claiming rent assistance. My question is what implications will there be renting out part of my house at present and in the future and how do you determine and who determines how much tax deduction can be claimed ie: Is depreciation/Interest calculated by the area or no. of rooms being rented or some other method. My PPOR mortgage is a line of credit with $270000 still owing have spent about $9000 on renovations on the granny flat.
thanks – Kenten
It is done in most cases by floor space rented out / total floor space
http://www.ato.gov.au/individuals/content.asp?doc=/content/36910.htm&page=2&H2
Get a valuation done !! see link below !
http://www.ato.gov.au/individuals/content.asp?doc=/content/36910.htm&page=3&H3
On this same subject – we rent out a granny flat behind our PPOR on which we claim a percentage of our household utilities expenses against the income we make.
FIRST QUESTION – A friend advised us to stop making claims for deductions and depreciation (it's fully furnished and we cover all utilities) as this would mean that when we sell the CGT would be less. Of-course we would continue to declare income, as required by law.
Is our friend right? Is this a legitimate way to reduce CGT when it comes time to sell our PPOR?
SECOND QUESTION – I believe you can transfer a PPOR from joint spouse names to one spouse. Does this mean we could put it in my name and once again reduce CGT as I'm in a lower income tax threshold?
thanks,
CarlinNot sure why this came off active topics list…..anyone able to help with my queries in previous post??
If you rent out part of your PPOR you will lose the CGT exemption on that part. Based on floor space as Duxter mentioned. You should also be able to claim part of all costs and depreciation as well. But having a LOC is not good if you use this by putting all income in and taking out money for groceries etc. The tax deductible portion will be decreasing rapidy, faster that the actual loan balance.
Carlin. It doesn't matter whether you claim or not you will still lose the CGT exemption if you are making money by renting part out. But if you are just having a boarder and charging them for minor expenses such as food and water bills etc, then this could be exempt from income tax and CGT.
You could transfer a PPOR to one name, but stamp duty would probably be payable. It is usually exempt if transfering from 1 to 2 names, but not sure if the other way around. What state are you in? If you do this you will still have the CGT problems tho, so best to use the lowest income earner – but remember incomes will change in the future and the loest income earner now could be the highest later.
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
Hi Terry,
Thanks for the info.
We don't have a LOC. We have our PPOR loan on a variable rate with mortgage offset account into which all IP rents go and from which we pay all bills.
The granny flat is self contained so it's a standard residential tenancy, not a boarder.
We're in SA. Will have to check re-stamp duty.
Wondering if it makes any difference how long the granny flat is rented out. eg: does the six year rule apply at all here?
thanks again,
CarlinHi carlin
6 year rule only applies to absences from your property.
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
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