ACT and TAX

Taxing Issues

Hi Team,

We have bought a house (PPOR) earlier this year. We moved from our original PPOR and have been renting since February.

Settlement of the new house is today. The seller (a builder) has asked us if we would rent the house back to him for a further 3 months. We agreed as the wad of cash being waved at us will offset the rent we are currently paying and also help with our newly acquired mortgage. So this effectively makes it an IP (for the time being).

With the option of claiming things such as stamp duty, legals, depreciation etc when renting an IP in the ACT, some questions have arisen.

1. Does the house have to be rented for a full 12 months before a claim can be submitted? or is it possible to claim a pro-rata period of 3 months (our initial intention was to move in after he left in November but we will consider reletting for the balance of the year if it means a healthy tax return )

2. Assuming that 12 months is required for a claim to be submitted, our rental period would be from 22Jul03 to 22Jul04, does that mean that we can only submit a claim for these expenses AFTER 22Jul05?

Cheers

Pedro the mouse
 
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Disclaimer: Not an accountant, not a lawyer, not a guru.

You should be able to claim in the first year for stamp duty etc. We settled a property on 29 June a couple of years back and put in our tax claim in August that year for the full amount.

(Note to non-canberrans - as you can't buy freehold here, you're buying a partially expired 99 year lease and therefore the stamp duty is on a lease hence tax deductible in the year it is incurred).

Pity you didn't settle a month ago, Pedro!

I'll rather someone more authoritative answered the CGT question but my understanding is as follows:

At worst (under current rules) I think you'd take the capital gain halve it and then and reduce it by the fraction that 3 months represents. Eg. suppose you sold after 3 years for a $100,000 cap gain you would pay tax on:

$100,000 / 2 * 3 / 36 or $4250

Cheers,

Bob
 
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