Can my brother rent my IP? Does this affect my tax deductibility?

[CAFDS]

Hi All,

I've recently gone unconditional on my 2nd IP, and have a question in relation to related parties.

My brother lives in Brisbane and has advised that he would like to rent my new IP. My question is that if I were to take him on as a tenant, would this affect my ability to claim all the usual tax deductions?

Also if I were to not use a PM, would this affect my insurance or anything similar?

Any info would be much appreciated.

 

[Danrc]

I think the answers are "yes" and "no", provided that he is paying market rent

On the top of insurance, I don't believe that having a PM has any affect on this

 

[coastymike]

If at commercial rates not an issue. If below market rates apportionment will be required. Refer fletcher v fct.

 

[Scott No Mates]

Provided that you put him on a lease as some insurers request a lease to be inplace and not on holdover, others don't cover self-managing landlords.

Are you going to run the usual checks ie employment, salary, current agent? Just part of your due diligence

 

[bob shovel]

Could you go through a PM and up the rent slightly to increase yield for better borrowing power for the next purchase? You can pay him cash for the additional he is paying on paper!

I am not an accountant and will not go to jail with you

 

[Terry_w]

Could you go through a PM and up the rent slightly to increase yield for better borrowing power for the next purchase? You can pay him cash for the additional he is paying on paper!

I am not an accountant and will not go to jail with you

And pay more tax?

 

[bob shovel]

And pay more tax?

haha... im a generous guy!

 

[CAFDS]

Thanks for the feedback all.

Scotty, yes he'll have to go through all the same hoops!

 

[citystar]

Personally I never rent my properties to family or friends however I'm sure people on this forum do it without any dramas but it's just not for me. If you are going to do it, make sure he pays bond and it gets lodged. The rent is arm-length rate and all the right forms and documents are completed.

 

[Hooray]

Luve to be on the fly on the wall when you hve to say 'sorry, brother. You don't make enough to rent my place.'