Hi guys,
I am looking at purchasing a PPOR with two kitchens, two bathrooms and a shared laundry. Though I would have to check, I don't believe the house is considered a duplex, just a large home with an extra kitchen and bathroom and with a floor plan that provides enough privacy to be like two homes under one roof.
If I were to move in as soon as possible after purchase, then rent out the other part of the home — but NOT move out myself and continue to reside in the other portion — can I then claim partial deductions (based on % floor plan) for the home for the time it is rented, as well as keep the PPOR CGT exemption when the time comes to sell?
Would I need to wait twelve months before renting out the other portion?
Cheers.
From what I recall, deductions can be claimed proportionally according to the floor area that is rented compared to total floor area. Same concept when it comes to CGT. You can't claim full PPOR exemption if you use the property to produce income. Someone else can verify this.
I assume you're asking the last question due to FHOG? If you can prove you're living in the property, I think you can claim the FHOG and rent the other part of your house, though this I'm not 100% sure upon.
Cheers
Tom
Thanks so much for the reply Tom,
'You can't claim full PPOR exemption if you use the property to produce income'
…So remaining in the property while renting a portion out changes your exemption? I understand you can rent out a PPOR for up to 6 years, claim deductions for those 6 years and still claim the full PPOR CGT exemption on resale (as long as you moved in as soon as practicable after purchase and moved back in before selling). I didn't realise this benefit would alter if you stayed living in the property.
O.K. let me get my head around this — if you couldn't claim the full exemption because of living there with income producing renters, it seems you would be better moving out and moving back in (up to) 6 years later? This way you could rent out the entire house and receive more rent, claim 100% of the total floor area (rather than say 50%) for tax purposes and also claim the full PPOR exemption.
It just seems counterintuitive to allow full PPOR CGT exemption to someone not living in the property for up to 6 years, and yet proportioning it for someone who never moved out. Just trying to get my head around it… Ouch.
Cheers
Oh, just briefly… no, the twelve month question wasn't specifically referring to FHOG; just a query as to whether there was a minimum time limit requirement (for CGT purposes) before turning a PPOR into an income producing property.
But thanks for your response — much appreciated.
If you use your home to produce income then it will be subject to CGT. Probably a % based on use.
The 6 year rule only applies to absences.
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I don't think you need to move back in before reselling it. As long as it is sold before the 6 year period is up, it will be CGT exempt.
No one said the ATO had to make sense.
Also for the CGT exemption to take place you can't have another PPOR while you are renting your first property otherwise it gets real messy.
Cheers
Tom
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