I bought a 3 bedroom apartment early this year and has been living in it as my PPOR. I'm planning to rent out 2 of the rooms but I'm not sure if there are any tax implications.
If I were to sell the apartment in future, will there be a CGT even if it's my PPOR?
Thanks.
If you plan to rent out a portion of your house then a proportion of the floor space is subject to CGT or as worded by ATO that portion is no longer be CGT exempt.
So if you rent out say 20 square metres and the house is 30 square metres then 2/3 of the house is subject to CGT.
It would be prudent to get a valuation so you know what the cost base was when you started renting out parts of your house. On the other side of the situation you can claim 2/3 of the interest costs. 2/3 of the council rates, 2/3 of the cost of house insurance, 2/3 of the cost of water rates against the income you receive from the renters.See this previous posting as it will give you more opinions / answers also and a link to the ATO on the subject.
https://www.propertyinvesting.com/forums/property-investing/help-needed/4327840i think it also depends on how your rent out the place. If the people are just contributing money for food and bills then this would not be income (so no negative gearing) and therefore no CGT consequences.
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 for all the feedback. I was always under the mistaken impression that the 6 years CGT exemption rule applies, but I guess in my case, I would still have to pay CGT if the rent is considered as an income.
What if the one of the room becomes vacant at any one point, can I still claim 2/3 of the expenses?
BTW, how much would a typical valuation cost and how do I know if a valuer is certified for the job?
The 6 year rule only applies to absences.
A valuation would cost around $300 to $400 and valuers must be licenced. Best to ring and ask what lender panels they are on. If a major bank uses them = good.
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
I'm about to call some valuers, but I'm just confused whether valuers also provide depreciation schedule? I was told that I would need to get a quantity surveyor to do that. Is that right?
In that case, does the valuer only provide a valuation for the property, e.g. $400k for the unit and nothing else?
I have another interesting question about renting out part of your PPOR. What happens to the amount of stamp duty that you would need to pay? Because it is a different rate depending on whether you live in your property or whether it’s an investment. I have just bought a unit and currently live there as my PPOR, but thinking of renting out a room, so would I have to pay extra stamp duty now or not?
xya wrote:I'm about to call some valuers, but I'm just confused whether valuers also provide depreciation schedule? I was told that I would need to get a quantity surveyor to do that. Is that right?In that case, does the valuer only provide a valuation for the property, e.g. $400k for the unit and nothing else?
Nope, valuers don't provide depreciation schedules. You will need a licenced quantity surveyor for that. The valuer may give a few figures – rent, land value, building value etc, but you couldn't use this value for the building for claiming depreciation on your tax.
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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