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Thanks Melbear, got you now! Now, why would they pay a higher CGT if it is claimed as an Investment property? It is the same GST rate whether you rent or not (ie holiday home is the same as an IP for CGT purposes). The main downside I can see from claiming it as a rental property, is...

No, just that what I am saying is legal and maybe what they are trying to do isnt. If they declare it to the ATO as being rented (even if to family members at a reduced rental but which they are subsidisingto make it market rent and this means that they will have to declare their own money...

Yep, so I agree with your accountant then. I guess this situation is similar to buying a beach house and loaning it to friends rent free. We have a beach house and when we sell it we will have to pay CGT if we make a profit. So anything we spend now we will use to reduce our base. But in SA...

True, but your friend is the Landlord not just a nice son who is helping out his parents! And will then go on to claim investment expenses on tax. Also, I would be a bit worried about telling the ACT Revenue Office that it wasn't rented out, to avoid paying Land Tax (if that is the system...

I think the ATO would say the purpose of the loan is to provide cheap accommodation for the parents, and not as income producing, so no write off. In SA, it doesnt matter whether the second property produces an income or not - you still pay Land Tax. So people who have held a beach shack (some...