Hi I'm planning to buy an investment property. However, I will still have to pay rent elsewhere for my place of residence. That's when it struck me why not stay in my new investment property where I will be my own tenant for a while (until I move to a new town), esp where my current rent is similar to the expected rent from the new property. Will that be an issue on the tax or legal side?
My concerns are:-
1. Will I still be eligible for tax deduction on the IP mortgage?
2. Are there other tax benefits from IP?
3. Who is the best counsel in that area?Thanks!
If you live in the property that you buy, none of it’s expenses will be tax deductible.
The one big thing that sticks out for me is CGT. You need to plan for this more than anything else. Please see your accountant about this point.
It will also make sense to talk to your banker or broker about correctly structuring your finance to meet your tax objectives. You need to think about what you plan to do with the property in a few years time as well.
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
So basically you will be buying as a PPOR and then turning it into a rental later on down the track? Is that what you mean?
It's not an IP if your are living in it. You can't claim any deductions while you live there but it could be advantageous from a CGT perspective.
If you live in it first then move out you can use the 6yr rule and rent it out for 6 years and not pay CGT (assuming you do not own another PPOR).
Yeah no tax deductions available if you live in it, but CGT down the track is an option.
oh thanks for all the comments . i'm not buying as PPOR but as an IP.
If you live in the property it would be classed as your main residence and not an IP.
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]
You don't buy it AS a PPOR or an IP. It is what it is. You can claim 1 residence as your PPOR. So if you live in it you can't claim it as an IP (as stated).
Sounds like you want to have your cake and eat it too. If you claim it as your PPOR you will not pay CGT but can't claim interest etc. If you claim interest etc you pay CGT. Decide which way you want to have it.
Hi Siewlin,
as everyone has pointed out already, the properties purpose is for you to live in it until at which point it becomes income producing from an arms length transaction. Therefor you will NOT have any tax deductions until you rent the property out. You cannot rent the property to yourself. Some investors use convoluted trust structures to do this however if you are not self employed or have other income than PAYG i wouldn't bother even exploring this, its not a simple (or always right) path to go down.
if the rents are the same on something you see yourself living in, from a cashflow perspective you could be better off by renting another house and having yours as an IP depending on depreciation etc. There are a number of other factors to consider here also, including CGT etc.
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