I am in the final stages of buying my first property with settlement in less than two weeks. The place comes tenanted with a periodic lease and I intend to terminate that on the settlement date and move into it (I used FHOG).
For tax-purposes can this place be an IP for the few weeks that the current tenants take to find a new place? Can I claim(pro-rata or otherwise) any of the expenses (insurance, rates, PM fees etc etc ) for this financial year or the next?
Talk to your accountant but I can't see why you couldn't claim IP related expenses during the period that it is an investment. At the same time, you'd assume that there would be CGT implications for the period that it's an IP – but it's highly unlikely that the property going to change in value in a few weeks.
In any case, it's something to discuss with your accountant.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Any expenses will be deductible for the period of time the property was tenanted.
Any claims wouldn't amount to much 2 weeks is about 4% of a year!
Complicates CGT too, though this shouldn't really be an issue in the long run. The property will be always subject to CGT as a % of the time it was rented.
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
Terry, would it be accurate in assuming that the OP wouldn't be eligible under the 6 year CGT rule even if they met all the other conditions if it arose in the future due to it being a IP for the first two weeks?
Cheers
Tom
Yep. 6 year rule would only apply after it was lived in first.
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
Terry, for CGT purposes can we choose between "% of time as IP" vs cost-base before it changed to a PPOR? The tenants will be moving out in 2 weeks so in total it would have been rented out for 4 weeks (2 in the last financial year). The property will be my PPOR for at least a year (FHOG and WA grant requirements) after then I'll move out and make it an IP. If I sell it 5 years from now can it still be exempt from CGT? Thanks.
proprookie wrote:Terry, for CGT purposes can we choose between "% of time as IP" vs cost-base before it changed to a PPOR? The tenants will be moving out in 2 weeks so in total it would have been rented out for 4 weeks (2 in the last financial year). The property will be my PPOR for at least a year (FHOG and WA grant requirements) after then I'll move out and make it an IP. If I sell it 5 years from now can it still be exempt from CGT? Thanks.No, there is no choice. It can never be exempt from CGT – but the effect will be minimal. You may even be able to claim the main residence exemption on the period after you move out.
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.
