I am a first home buyer about to buy an owner occupier. I am likely to buy in Perth. Within 5 years I'm thinking of moving back to Qld. My thinking is I would leave the Perth property as a rental and buy another property in Qld. This purchase could happen before I return, i.e. in a year or so.
I work on a remote mine site where I'm there for 2 weeks and return home for a week off. Based on that, I don't want to rent a property that I only inhabit for 1 in every 3 weeks. I see that as very inefficient.
I'm looking for advice on the best way to structure finance and so on, so I've got the best set-up for tax purposes. What are the rules regarding length of time in a residence for it to be tax free on sale? What about when you move house to another? If you've got an owner occupier, can it become a rental (when you move out) with tax deductions on interest payments? How does this all work? Maybe you have a recommended book that explains this in detail, or some other info source.
Thanks for any help.
Weswas
There are a couple of factors and steps to consider.
Firstly buying as a first time buyer and I assume wishing to claim the First Home Owners Grant you will have little alternative but to buy the property in your sole name as using a Trust or other entity will disqualify you from claiming the FHOG on this property.
Secondly there is not point in trying to pay down the principal significantly when you intend to eventually turn the property into an IP as the interest charged on the funds resulting from any redraw would not be tax deductible unless they are for investment purposes.
I would therefore look to take out an interest only loan with 100% offset account and put all of my savings into the offset account to maximise the tax effectiveness when you rent the property out but also reduce the interest charged in the meantime.
Now the question as to what lvr you look at will depend on whether you wish to pay mortgage insurance and preserve your capital or not.
A good independant mortgage broker should be able to give you some options as many lenders will not like the fact on a high lvr that you wish to take out an interest only loan on your PPOR.
Richard Taylor | Australia's leading private lender
Look into the 6 year rule on CGT regarding absences from the main residence – s118-145 ITAA. You can basically rent out your main residence for up to 6 years and not have to pay CGT if you later sell it.
So, you could buy a house, move in, establish it as your main residence, meet the FHOG requirements and then rent it. And then rent yourself and claim negative gearing.
You should look at getting a high loan, IO with a 100% offset account.
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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