Hi all
Desperately need some valued second opinions.
My friend and her husband are about to purchase a property for her parents to live in. At this stage, her parents will only be able (or are willing) to pay $170 per week. Market rental would be $350 to $400 per week. Loan will be for approx $400K. Adding in land tax, rates, water etc. will see a substantial shortfall in income versus costs.
Their accountant has advised them (a. not to go ahead) b. if they do, then not to claim it as a rental, and say that any money from the parents is a 'donation', and to add all expenses over the years to cost base to reduce CGT if (when?) they sell. This advice is because my friend works part time and earns approx $30K per year, and hubby is only in the 30% tax bracket (assume that's below $75K or thereabouts). She has said that 'It's not worth claiming it'! Oh, and if you don't claim it, you won't have to pay land tax!
Would this be a fair call, and would other accountants see any valid reason for this? I am struggling to comprehend the advice, and when I questioned my friend as to whether they would ever sell, she was undecided. Her parents are only in their 60s, so presumably will be in the house for a number of years, and even after that my friend is thinking that an IP to have while the kids are heading for Uni etc. would be a good idea. So, no real plans to sell, at which point no CGT is hardly an issue!
I think one of the accountants phrases was 'You'd only be $6000 better off if you claimed it'. I mean, WT-? To knock back $6000 when you're really going to struggle to pay for the thing is beyond my comprehension.
Any different arguments to put to my mate would be appreciated.
Desperately need some valued second opinions.
My friend and her husband are about to purchase a property for her parents to live in. At this stage, her parents will only be able (or are willing) to pay $170 per week. Market rental would be $350 to $400 per week. Loan will be for approx $400K. Adding in land tax, rates, water etc. will see a substantial shortfall in income versus costs.
Their accountant has advised them (a. not to go ahead) b. if they do, then not to claim it as a rental, and say that any money from the parents is a 'donation', and to add all expenses over the years to cost base to reduce CGT if (when?) they sell. This advice is because my friend works part time and earns approx $30K per year, and hubby is only in the 30% tax bracket (assume that's below $75K or thereabouts). She has said that 'It's not worth claiming it'! Oh, and if you don't claim it, you won't have to pay land tax!
Would this be a fair call, and would other accountants see any valid reason for this? I am struggling to comprehend the advice, and when I questioned my friend as to whether they would ever sell, she was undecided. Her parents are only in their 60s, so presumably will be in the house for a number of years, and even after that my friend is thinking that an IP to have while the kids are heading for Uni etc. would be a good idea. So, no real plans to sell, at which point no CGT is hardly an issue!
I think one of the accountants phrases was 'You'd only be $6000 better off if you claimed it'. I mean, WT-? To knock back $6000 when you're really going to struggle to pay for the thing is beyond my comprehension.
Any different arguments to put to my mate would be appreciated.