Hey,
Been trying to work this out for myself but struggling with the figures a bit….. will keep working on this but wanted to get some thoughts here as well.
My partner and I are able to get the first home owners grant which we were intending to get, live in the property for 6 months (as per the requirements for the grant) as we renovate ready for renting after the 6 months is up.
However my question is are we better off forgetting about the FHOG and going for the tax benefits associated with owning an IP?
We are considering using a property buyer so if we do it as an IP straight away we’ll be able to claim that as tax deductible as well as all the other deductible expenses associated with holding a IP.We were going to put the FHOG towards the reno but I’m thinking we could get a personal loan instead and claim the interest as a tax deduction.
I’m going to look for a good accountant to advise on this as well but wanted to get some thoughts on here as well.
Cheers
TG
Why not do the sums and see?
Also factor in if you live in the house first you can rent it for up to 6 years and have it CGT free. That could be an additional big saving.And buyers agents fees are considered a capital expense and only deductible against the capital gains of the property when sold.
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’ve been trying to do the sums but as I’m still learning it’s a little daunting to make sure I’ve taken everything into account.
I’ve been working up a excel document which I’m adding to as I learn about other things to consider and I think I will very shortly have a good document to ensure I can do the sums.I’ll also engage the services of an account when I have a good grasp myself but I wondered if anyone had any immediate thoughts on here.
Thanks for the tips provided above.
Taffygirl
Not sure which State you are thinking of buying in but as a First Home Buyer you maybe entitled to a concessionary rate of Stamp Duty.
If you purchase an IP first you will still qualify for the the FHOG but will probably loose the concession.
In Qld this means NO stamp duty at all on a purchase price of upto $500,000 and this is a big big saving.
The rent you would receive plus any Tax credit will certainly not be as great over a 6 month period as the Stamp Duty savings.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Taffygirl,
If you purchase the property as an IP and do the renovations immediately, then technically you can't claim deductions on the property unless it is tenanted or available for rent at the time. You'd also need to be careful over what would be classified as a repair and capital works if this were the case, as immediate deductions vs depreciation can change your tax position.
As well as an accountant, once you have purchased the property, speak with a good quantity surveyor regarding scrap values and depreciation if you are going to use it as an IP.
With FHOG and PPR concessions against tax deductions (that also may not be available immediately), I've found in most cases with my clients that the FHOG wins out more often.
Good luck and I applaud your blog – keep it up! Remember that even if you have a pre-approval, ensure that your lender will accept some of the securities you have been looking at (such as apartments less than 50sqm)…
Feel free to PM me if you want the QS and accountants we use in Sydney.
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