Shared accomodation
- Thread starter IndexFund
- Start date
IF, are you sure you want to do this? It makes it much more confusing if you're mixing PPOR and IP.
Alex
Why would it? $120 a week will greatly help offset the mortgage repayments.
IndexFund
Do you intend keeping the property as your PPOR?
Do you intend claiming part of the interest payments against the rental income?
If the house is to be your PPOR and you claim interest against the rental income, then you may have to pay CGT (pro-rated) when you sell your PPOR.
If you intend doing this, may I suggest you consult a property-savvy accountant before doing so - you need to be fully aware of all the pros and cons of such an approach.
Cheers
LynnH
Do you intend keeping the property as your PPOR?
Do you intend claiming part of the interest payments against the rental income?
If the house is to be your PPOR and you claim interest against the rental income, then you may have to pay CGT (pro-rated) when you sell your PPOR.
If you intend doing this, may I suggest you consult a property-savvy accountant before doing so - you need to be fully aware of all the pros and cons of such an approach.
Cheers
LynnH
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Hi Lynn, Yes it will be my PPOR. Yes I do intend to use that rental income to pay for the mortgage or to pay for my bills/food. Whats this CGT?
Capital Gains Tax. Normally your PPOR will be exempt, but if you do claim the rent as income (and also part of the mortgage interest as deductions), your CGT exemption will be affected because it's no longer solely your own residence.
Alex
CGT = Capital Gains Tax. If you make a gain when you sell property, half that gain is subject to CGT at your marginal tax rate (providing you have owned the property for more than 12 months). Normally your PPOR is CGT-fee when you sell it - however if you rent out part of the property, you will probably have to pay a proportionate amount of CGT when you sell.
It is possible to have someone else share your PPOR as a boarder, however the amount you can charge the boarder must reflect the cost of the boarder living in the house, and you cannot claim interest (nor do you have to declare the income (i.e. board) you receive).
Things can get quite complicated when this situation occurs - I really do suggest you see a good property-savvy accountant. When s/he analyses your situation, s/he will be able to explain exactly what is involved.
Cheers
LynnH
It is possible to have someone else share your PPOR as a boarder, however the amount you can charge the boarder must reflect the cost of the boarder living in the house, and you cannot claim interest (nor do you have to declare the income (i.e. board) you receive).
Things can get quite complicated when this situation occurs - I really do suggest you see a good property-savvy accountant. When s/he analyses your situation, s/he will be able to explain exactly what is involved.
Cheers
LynnH
IndexFund,
If you want to keep your property as PPoR, and also share it with a tenant, the best thing is to get your rent payments in CASH and don't declare them to the tax office.
This means you are not subject to CGT, but it also means you can not negative gear for tax benefits. But in your instance, it is probably better to save on the CGT.
Many share tenants are happy to pay cash for a room.
If you want to keep your property as PPoR, and also share it with a tenant, the best thing is to get your rent payments in CASH and don't declare them to the tax office.
This means you are not subject to CGT, but it also means you can not negative gear for tax benefits. But in your instance, it is probably better to save on the CGT.
Many share tenants are happy to pay cash for a room.
I don't believe that hiding the cash from the ATO is a good policy.
When these tenants do their tax return they put down your address as their place of residence.
Additionally, if you ever end up having arguments with them they can dob you in and you could get in serious trouble...
Cheers
Indexfund
If you wish to do that I suggest you do a valuation of your PPOR when the tenant moves in and 1 valuation when the tenant moves out.
If there was any capital gains in that period if & when you eventually sell your PPOR you will have to pay CGT for the difference between the 2 valuations.
I suggest that for the period you are leasing the room out you don't claim any depreciation because by doing so you are declaring how much of your PPOR is leased out and sometimes landlords can get greedy and declare more that the actual space the tenant is using so they get some money back from tax but then they are liable for a higher CGT.
Plus this claim can complicate your annual tax return.
I wouldn't worry much about the CGT.
Depending on how much of your PPOR is leased out you probably won't have to pay much tax and over time inflation eats into the small CG so the tax will not be significant.
Cheers
If you wish to do that I suggest you do a valuation of your PPOR when the tenant moves in and 1 valuation when the tenant moves out.
If there was any capital gains in that period if & when you eventually sell your PPOR you will have to pay CGT for the difference between the 2 valuations.
I suggest that for the period you are leasing the room out you don't claim any depreciation because by doing so you are declaring how much of your PPOR is leased out and sometimes landlords can get greedy and declare more that the actual space the tenant is using so they get some money back from tax but then they are liable for a higher CGT.
Plus this claim can complicate your annual tax return.
I wouldn't worry much about the CGT.
Depending on how much of your PPOR is leased out you probably won't have to pay much tax and over time inflation eats into the small CG so the tax will not be significant.
Cheers
IF,
Do it mate. I do. Not had a problem once. It's up to you though if you choose to declare the income or not.
Mark
Do it mate. I do. Not had a problem once. It's up to you though if you choose to declare the income or not.
Mark
http://www.somersoft.com/forums/showthread.php?t=32393
Some more info in the above thread.
Also:
Really you would need to contact the ATO to better define your particular situation.
Can you find any family members that may be interested in moving in and paying board as it would appear that any family payments are excluded.
It's easy to find housemates, I have used http://au.easyroommate.com/ in the past. I think I paid around $50 for 6 (or 12?) months, or you can just create a free listing and hope that premium members contact you.
Some more info in the above thread.
Also:
http://law.ato.gov.au/atolaw/view.htm?docid=ITR/IT2167/NAT/ATO/00001
Really you would need to contact the ATO to better define your particular situation.
Can you find any family members that may be interested in moving in and paying board as it would appear that any family payments are excluded.
It's easy to find housemates, I have used http://au.easyroommate.com/ in the past. I think I paid around $50 for 6 (or 12?) months, or you can just create a free listing and hope that premium members contact you.
Get YOURSELF pregnant so that you get to claim HER assets? Science is doing some pretty weird things these days.
Dude, you really have to work on that wasting your energy complaining about how unfair the world is thing. It sounds like you have a list of entities and groups (ATO, fat cat investors, family court) and another list of negative remarks, and just pick one from list A and one from list B and throw that out every so often.
It might be theraputic, but it sure won't make you any richer, and demonising a group like that blinds you to the benefits of working with them instead of against them. You're not going to change the ATO or anything else just by complaining about it. So why not work with it? Play the rules as they are, not as you wish them to be, no matter how unfair (you think) they are.
The ATO (and councils) can be your friend if you take the time to understand their rules. Depreciation, CG discounts, PPOR CG exemptions, land tax exemptions for different entity types for different states, trusts, companies, dividend franking.... these are all great tools that will make you rich. A bloated ATO can work in YOUR favour.
As just one example, we can claim depreciation on an IP that we don't have to really pay for. We get the tax benefits, and we only pay it back when we sell the property. So we get, say, a deduction of $10,000 and only have to pay it back in the form of $5,000 in capital gains when we sell, and that might be in 20 years when 5,000 is worth a whole lot less than 5,000 now.
Alex
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I would definitely consider your roommate as contributing to shared expenses, rather than being your tenant, and leave the ATO out of it. Provided the rent level is a reasonable reflection of shared living expenses and the arrangement is entered into in good faith, I think the ATO would neither want to nor be successful proceeding against you.
This could work well when you have a couple of mates staying over but can be a very dangerous thing if the person he is sharing with is a woman.
When she finally moves out he might have to explain to the courts why she doesn't deserve her fair share of the house and his other assets.
In the later case, I'd want to have bank records showing the rental payments a lease agreement and would definitely want the rent included in my tax return.
Cheers.
True, BV, I wasn't talking about a family law perspective, just ATO, as IndexFund hasn't mentioned a domestic partner.
A roommate who is not in a relationship with you, regardless of gender, is no threat to your assets, as they'd have to demonstrate the existence of something more than a roommate relationship, which they wouldn't be able to do - you can't prove what doesn't exist.
Obviously if you're sleeping with one (or more) of your roommates, you need to be very careful and the whole ballgame changes.
A roommate who is not in a relationship with you, regardless of gender, is no threat to your assets, as they'd have to demonstrate the existence of something more than a roommate relationship, which they wouldn't be able to do - you can't prove what doesn't exist.
Obviously if you're sleeping with one (or more
) of your roommates, you need to be very careful and the whole ballgame changes.
Information
I have recently gone through all this as we have a PPOR that is big enough to accommodate share accommodation.
In Queensland (Gold Coast in particular):
* Council allows up to and including four residents other than owner-occupiers / family.
* The RTA is only interested if you have more than four tenants. And even then, shared accommodation is a bit of a grey area.
* ATO - VERY MUCH INTERESTED IN YOUR EXTRA RENTAL INCOME! There is a bit of information on ATO's website regarding this. The only time the income is considered negligible is when it is under a home-stay arrangement of no more than two residents. It is very clearly stated that any income from at-arms letting of a residence is proper income. You can also claim deductions, as your property is now considered as an IP. However, if it was your PPOR first, then the 6 year rule should apply (can anyone confirm this?).
The main potential complications in a shared accommodation arrangement are:
- Does your insurance cover such an arrangement?
- There are no proper shared accommodation forms (the RTA ones don't really apply)
- Problems with residents (how do you evict?)
Mind you, if you have a stringent selection criteria, using it would minimise any problems. We have not had any issues worth mentioning and everything has been smooth sailing.
Hope some of that helps.
All this is of course from my experience and talks with the above institutions.
I have recently gone through all this as we have a PPOR that is big enough to accommodate share accommodation.
In Queensland (Gold Coast in particular):
* Council allows up to and including four residents other than owner-occupiers / family.
* The RTA is only interested if you have more than four tenants. And even then, shared accommodation is a bit of a grey area.
* ATO - VERY MUCH INTERESTED IN YOUR EXTRA RENTAL INCOME! There is a bit of information on ATO's website regarding this. The only time the income is considered negligible is when it is under a home-stay arrangement of no more than two residents. It is very clearly stated that any income from at-arms letting of a residence is proper income. You can also claim deductions, as your property is now considered as an IP. However, if it was your PPOR first, then the 6 year rule should apply (can anyone confirm this?).
The main potential complications in a shared accommodation arrangement are:
- Does your insurance cover such an arrangement?
- There are no proper shared accommodation forms (the RTA ones don't really apply)
- Problems with residents (how do you evict?)
Mind you, if you have a stringent selection criteria, using it would minimise any problems. We have not had any issues worth mentioning and everything has been smooth sailing.
Hope some of that helps.
All this is of course from my experience and talks with the above institutions.
Obviously if you're sleeping with one (or more
Actually, interesting point OP, about the one or more room mates.
I wonder how a family court judge would view a guy having regular sex with 2 room mates?
A major proof of a de facto relationship is that it is between two people.
That could be the defence a lot of guys are looking for
The other gotcha with these matters is that even if a de facto relationship cannot be proven, people still have property rights under 'domestic relationships". And that opens up a whole new can of worms, and new avenues for lawyers to prosper from conflict.
http://www.law4u.com.au/cgi-bin/factsheet_right.asp?article_id=476
