Hi All, I am moving up north and have to rent out my PPOR for 12 months, at this stage the rent will just cover my mortgage (variable). My question is, what can I do to make the most out of this in terms of claiming depreciation and tax etc? I won't be moving into a high paid mining job or anything and really need to get this right. I am obvioulsy a noob at this… I am currently paying $400 per month above what is required on my mortgage, should I alter this? Also, I was putting off placing new carpet in 2 bedrooms and getting some paving work done in the backyard is this a good idea or will i pay less tax if i do it whilst it is rented out
Cheers
You may find a quantity surveyor may be useful in working out what you can depreciate.
You are paying $400 more a month than is required
so my question is are you likely to be renting out the place for more than 12 months and are you planning on buying more investment properties later down the track ?
If yes you may find an offset account better as it gives you flexibility later if you need cash for a deposit on another property.
Also – if the rent just covers the mortgage you will have negative gearing due to the expenses also being claimable.
Things like council rates, landlords insurance, water rates and interest charges are claimable.
So total income = rental income – (council rates +landlords insurance + water rates +mortgage insurance + depreciation)
so this will most likely equal a negative number
(which reduces taxable income giving you a small refund at tax return time)
Also you may wish to nominate this PPOR to be your PPOR even though you are renting it out for up to six years to avoid any future capital gains tax. You just can't claim PPOR exemption on two properties at the same time.The paving and new carpet would be an improvement most likely and only depreciation could be claimed on them.
Hey duckster,
Can you explain and go into a bit more detail about "Also you may wish to nominate this PPOR to be your PPOR even though you are renting it out for up to six years to avoid any future capital gains tax."
Sounds interesting, I didn't know you could do this.
Thank you, that is some very valuable and appreciated information.
You may find a quantity surveyor may be useful in working out what you can depreciate.
You are paying $400 more a month than is required so my question is are you likely to be renting out the place for more than 12 months and are you planning on buying more investment properties later down the track ? Would love to, that is a definite goal of mine since I bought my first house 3.5 years ago.
If yes you may find an offset account better as it gives you flexibility later if you need cash for a deposit on another property.I do have $15k up my sleeve to do this but that would probably just cover stamp duty for something around the price I could afford.
Also – if the rent just covers the mortgage you will have negative gearing due to the expenses also being claimable.
Things like council rates, landlords insurance, water rates and interest charges are claimable.
So total income = rental income – (council rates +landlords insurance + water rates +mortgage insurance + depreciation)
so this will most likely equal a negative number
(which reduces taxable income giving you a small refund at tax return time)
Sweet, have rented out once before but that was only for 6 months and i didn't really know what i was doing.
Also you may wish to nominate this PPOR to be your PPOR even though you are renting it out for up to six years to avoid any future capital gains tax. You just can't claim PPOR exemption on two properties at the same time.Ok thats something new to me that i hadnt thought about, i will wait to see what you say to Burnie about this.
The paving and new carpet would be an improvement most likely and only depreciation could be claimed on them..
Cheers, i thought i might be able to claim ‘wear + tear’ on carpet but if it’s a 12 months lease i'd imagine this may look suspect.
duckster wrote:You may find a quantity surveyor may be useful in working out what you can depreciate.Also you may wish to nominate this PPOR to be your PPOR even though you are renting it out for up to six years to avoid any future capital gains tax. You just can't claim PPOR exemption on two properties at the same time.
I was aware that you could rent out your PPOR for up to 6 (7?) yrs ; and provided you either sold at that point (or during) or returned to the property at that point, there were no capital gains payable on sale – but, as I have not done it, but will be doing it soon, I wasn't aware you had to 'NOMINATE' it – to whom/how do you nominate it??
No need to nominate it. If you are absent for up to 6 years, and you are not claiming any other property as your main residence you can rent out your house and claim all the normal costs (and declare the rent as income).
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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