Hi All,
I am 25 years old and just bought my first property which I'm quite excited about! A 2 bedroom apartment in Sydney.
I plan to live in the apartment and get somebody in to rent or board in the second room.
Quick question, is it legally possible to get somebody in the second room paying me $200 cash a week which I do not declare for tax, meaning I do not have to pay capital gains tax or income tax, but then I do not get tax deductions on interest repayments? And is this financially a good thing to do?
I have heard of others doing this.
B
Hey,
From my understanding LEGALLY you are meant to declare any money earned. It is something that people do however i dont believe it is legal. It can be a good thing if you are planning to sell soon and dont want to pay capital gains tax.
Having said that, if you do things legally, you will always have less trouble in life and the future.
hey financial freedom r there any seminars i could attend to help point me in right direction 4 an investment property? i need help n dont know where to start
Board doesn't have to be declared. But this is supposed to be limited to money for reimbursement of expenses and food etc.
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…
and how does it work if I do rent out one room in terms of tax deductions and capital gains? This is my plan.
1) Live in property 6 months get FHOG.
2) Then rent out one bedroom at $200 per week for 5 years
3) After 5 years, rent out whole apartment and I'll buy another PPOR.Firslt, current repayments are $2000 and so at $200 rent per week do I have to pay tax on that or because its negatively geared no tax? And the remainding $1,200 per month is this all tax deductable from my normal income tax?
Secondly, how does capital gains tax get calculated in this situation if I rent out only one bedroom for 5 years?
Probaly like this.
$200 pw is income. = $10,400 paYou will be able to claim expenses too. This will probably depend on how much of the apartment you are renting out as a percentage. If you are renting 1 room of a 2 bedroom apartment, then you could probably claim half of all expenses including:
interest
rates,
insurance,
body corp fees
accounting
etcThen you can also claim non cash expenses such as 20% of loan establishment costs (incl LMI) over 5 years. Depreciation on building and depreciation on fittings (such as carpets, hotwater systems etc). You should get a quantity surveyor to assess the values of all these things as they can add up.
Futher possible deductions would depend on how the household is set up. If the tenant watches your TV you could also claim a percentage of that (depreciation). Pots and pans, furniture etc too.
There may be other things you can claim as deductions outright like toilet paper if you supply it. internet, electricity etc.
(remember on 50% on everything).All these expenses should add up to much more than you are receiving in rent, so you will have a loss. This loss can offset other income so you should save tax.
But bear in mind you will lose the CGT exemption on the part you are renting out so it may end up costing you more in the long run.
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
You must be logged in to reply to this topic. If you don't have an account, you can register here.
