Purchased property with tenant till 2009, then make it PPOR - can I claim deductions?

[buckerooni]

Hey All,

I bought my first property on the week-end (woo hoo!) which comes with a tenant on a fixed contract till March 2009. Can I claim all expenses during that period like an IP? Does my loan structure contibute to the way in which this can be handled (haven't decided on a structure yet).

Thanks.

[LynnH]

buckerooni

Yes, you can claim all property-related expenses just as you would for a property purchased as an IP.

Be careful with your loan structure and ensure that you do not mix personal funds and investment-related funds. May I suggest that you see an experienced mortgage broker, who should be able to point you in the right direction with your loan structure. 'Tis best to get it right at the start!

Cheers
LynnH

[buckerooni]

Be careful with your loan structure and ensure that you do not mix personal funds and investment-related funds.


To be clear about this, are you talking about where I pay my expenses from? Are you suggesting that I have a seperate investment-specific account that I pay expenses from? I am seeing a tax person tomorrow but would like as much material as possible to discuss.

As it's most likely a 9 month IP scenario, I have to work out where my efforts are worth spending (i.e developing a depreciation schedule on a 1950's apartment with oldish fittings probably isn't going to pay for itself). Any help along these lines appreciated!

[LynnH]

buckerooni

One example of the sort of scenario I was referring to is where you buy a property with an all-in-one type loan into which you pay your salary and withdraw funds as necessary to meet your expenses. When your salary is paid in, it is treated as a loan repayment and subsequent withdrawals are treated as personal expenditure, therefore you can't claim all the interest while the property is an IP - interest has to be apportioned between business (IP) and personal use and the calculations can become rather messy.

The better solution would be to buy the property with an IO loan and have an offset a/c attached to that loan, into which income is paid and from which expenses are drawn. That way, the loan funds remain uncontaminated.

You can pay your expenses from whatever source you wish. However you can't claim interest on any account from which the expenses are deducted unless that account is used solely for investment purposes.

The above scenario is not necessarily the best for your individual situation. There are many ways to finance your investments and different people will have different strategies/goals/income levels/etc - a good MB will set you on the right path from the outset and will be an invaluable part of your investing team into the future.

Cheers
LynnH

[buckerooni]

thanks LynnH that all makes perfect sense, at last I geddit!

[LynnH]

No worries, buckerooni. Good luck in your investing journey!

Cheers
LynnH

[Yerfdog]

[QUOTE=buckerooni;442064]Hey All,

I bought my first property on the week-end (woo hoo!) which comes with a tenant on a fixed contract till March 2009. Can I claim all expenses during that period like an IP? QUOTE]

Congrat!

Remember, you can only claim related property expenses, repair and maintance, but you cannot claim on any improvement, e.g. adding air con or security screens. Those improvements will become part of your capital cost base when you sell (DON'T) the property. Talk to QS and see if it is worth to get a dep. schedule done for 8 months.

Cheers