Capital works deductions implications and C.G.T

[Jack]

Hi all,

I have a situation where I have had to move out of my PPOR (feb 2004) into one of my IP.

The PPOR was built and purchased new in 1990 a carport was built in 1993 and a retaining wall built in 1995 the property has a mortgage of 20k.

Prior to moving out of my PPOR I renovated it. I fitted a new kitchen, dishwasher, aircon, stove, curtains and painted throughout.

My questions to this situation are

1. If I sell the PPOR in the future How many years (if any) can I rent out the PPOR before the ATO will subject the sale to Capital gains tax

2. If I am renting out the PPOR I believe I can claim a capital works deduction on the cost of construction (established by a quantity surveyor) and also for the carport and retaining wall and new kitchen.
- But what implications will these deductions have on a future sale e.g Cost base adjustment for capital works deduction would I be subject to this as the property was or is a PPOR.

3. I believe I can claim a depreciation on dishwasher, aircon, stove, curtains but what about painting throughout

I have recently read the ATO publication Rental properties 03/04 but I am unsure on the above points, any help would be greatly appreciated

Thanks Jack,

 

[DaleGG]

Hi Jack

You can rent the old PPOR for up to 6 years before it is subject to CGT Providing that you don't have another PPOR during that period.

Yes, you can claim the Capital Works deductions without triggering anything nasty such as cost base adjustments.

Yes, you can claim the depreciation on the chattels and fixtures, but, no the painting would not be depreciated. If it is done whilst the property is available for rent, then, a full deduction would be available though.

Cheers

Dale

 

[noddy]

Just to clarify..

If I move out of primary residence today and rent it out tommorrow; then I paint the inside and render the outside in a months time, and then sell after 3 months, the depreciation on any capital works can be claimed as well as the full cost of deductions such as painting and rendering?

If I replaced the kitchen and carpets as well?

Noddy

 

[DaleGG]

Hi Noddy

Yes, if the property is available for rent, then, the depreciation on any improvements undertaken is allowed as a tax deduction. However, be aware that 2.5% depreciation for 3 months, or so, would not amount to very much at all.

The tax office might argue, in an audit situation, that the painting was undertaken as getting the property ready for sale, too, and so there is no guarantee that they would allow a claim for repairs.

As always, focus on your primary intention and do what you can to make that happen as best you can in your favour, then, if your accountant allows you a tax deduction for the money spent...perfect!

Dale