Hi there,
I am looking to purchase my first property and wanted to make sure I purchase it in the most effective way. The property will be an IP for the long term but I plan to:
- Initially have the property as an IP to claim tax benefits (interest from negative gearing, depreciation, etc) for this financial year.
- In the second half of next year, live in the property for just over six months (to receive FHOG benefits). In this time I plan to renovate the property.
- Afterwards turn the property back into an IP where it will remain that way for the foreseeable future.
Is this a good method? Are there any major tax or legal implications that I should be aware of for this method? Does this method effect CGT in the future if I sell (I understand I don’t pay CGT if I sell and live in the property within six years)?
Just like to say that this forum is excellent and has provided me with some really practical ideas already!Many thanks!
Hi Zaclan,
I would be careful about intially renting the property out in relation to the FHOG as you are supposed to move into the premises as soon as possible, if there was aleady a tennant in there before purchasing then you would have to move in as soon as the tenant vacates.
In regards to using it for your PPOR you can use the 6 year rule where the property was your PPOR first and then you rented it out. If you returned to the premises before 6 years from the date of first leasing the property you could still maintain it as your PPOR and receive the CGT main residence exemption upon selling. Or, if you then lease it out again after moving back in, the 6 yr clock starts again.
Again, I think you need to be careful about your INTENTION with your home loan etc, and renting it out in the first 6 months.
Cheers
Great thanks for the info.
I’ve found a property I’m interested in but the property will be leased until Mar 2011. I would plan to move in straight afterwards to avoid any hassles.. While the tenant is still there can I claim any deductions as an investment property or best not to claim anything?
Cheers
zaclan wrote:Great thanks for the info. I've found a property I'm interested in but the property will be leased until Mar 2011. I would plan to move in straight afterwards to avoid any hassles.. While the tenant is still there can I claim any deductions as an investment property or best not to claim anything? CheersHi
What state are you looking to purchase in as some states have different rules?
Hi Mike,
The property is based in Sydney.
Thanks
In NSW so long as you live in the property as your PPOR continuously for 6 months commencing within the first 12 months following settlement you are entitled to both the FHOG and the stamp duty exemption if applicable.
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