First Property

[xQuIz8]

Just a short introduction about myself. I am PR in Australia working in an engineering firm. Long story short, I am currently looking to purchase a property with my partner. However, we're unsure how to structure the loan.
We're planning to purchase a property(2bedroom apmt) valued 450k therabouts. For now, we plan to live in one room, and rent out the other.
We reckon we'll be able to get at least 200p/w for the room due to the location.

We have 90% deposit and we're getting a 360k loan.
As far as I know, if the property is purchased using FHOG/ for residential purpose, the interests etc arent tax deductible.. however if its purchased
as an investment property, it is.

Would it be possible for us to live in one room and rent out the other ? Can we then claim half the interests paid monthly during tax return ?
same goes for all other the other 50% expenses incurred on the property. What would you experts out there suggest/recommend in this scenario of ours ?

IF, one day, we decide to return to our home country, what implications would it have on my property ? How much do we get taxed for our rental income if we were to rent it out ?
We wouldnt be able to benefit from tax-deductions from interest rates etc. ?

Also, I have the FHOG but realized that I wouldnt be able to use it if I plan to rent half out. However, perhaps I can rent it to a friend in a hush-hush manner. Just thinking out loud.

Its been driving me nuts trying to figure out the best way to come about this. I talked to an accountant but he wanted $250 for a 30mins consultation to ask questions. As i'm very green in this field, I have no idea if its really the market rate.

Please kindly give your views and suggestions. We would really much appreciate it. Thanks a million !!

 

[yo yo ma]

You can use this strategy but it will make you liable for Capital Gains Tax when you sell. Also, the deductions will not be 50%... they must be apportioned appropriately based on the floor space occupied. You then won't be able to claim the FHOG.

I suggest you rent the room out and forget about the tax deductions for now... have a read of this PDF from the ATO; there is an example on p7 about renting part of a residential property.

http://www.ato.gov.au/content/downloads/IND00133187n17290608.pdf

 

[josko]

Hi there,

You can still call this house your Principal Place of Residence and rent it out and not pay CGT for 6 years.

As far renting it to a "friend" is concerned, that is up to you.

Regards Jo

 

[Aaron Sice]

forget tax deductions and just be happy with the extra cashflow.

 

[xQuIz8]

Thanks for your reply guys. I do appreciate your suggestions.

In that case, use FHOG then rent out the other room discreetly to a relative.
After 6 months.. I'll claim tax deductions for 50% of the property(depending on the area occupied) as a result of declaring that I am renting out one room. Or does it have to be AFTER 12 months ?

I'm just trying to be as cost effective as possible as my partner and I will really have to be thrifty to service the loan. Thanks again guys. = )

 

[yo yo ma]

Assuming you are in Victoria, the following applies:

When must I move into the home?

At least one applicant must occupy the home as his or her principal place of residence within 12 months from either the date of settlement or completion of construction.


Is there a minimum time limit I have to reside in the property to get the grant?

At least one applicant must occupy the home as his or her principal place of residence for a continuous period of at least 6 months, commencing within 12 months of either the date of settlement or completion of construction.

I would contact the SRO, tell them exactly what you are planning and ask if you still qualify. You then really need specific advice from an accountant. If you are going to use part of the place as an IP, you need to know how much you will save by doing it and what CGT implications there are.

http://www.sro.vic.gov.au/sro/SROWebSite.nsf/rebates_fhog_FAQ.htm

 

[josko]

Thanks for your reply guys. I do appreciate your suggestions.

In that case, use FHOG then rent out the other room discreetly to a relative.
After 6 months.. I'll claim tax deductions for 50% of the property(depending on the area occupied) as a result of declaring that I am renting out one room. Or does it have to be AFTER 12 months ?

I'm just trying to be as cost effective as possible as my partner and I will really have to be thrifty to service the loan. Thanks again guys. = )

Hi there,

If you fill out this form. (Income Tax Variation Form)
http://www.lakesideconsultants.com.au/forms/fp/ITWV%20Tax%20Witholding_0708FY.pdf

You can get your employer to pay less tax on your behalf and therefore put more money in your pocket.

I don't quite understand how you would get a rebate for tax though after 6 months.

Regards Jo

 

[yo yo ma]

You can still call this house your Principal Place of Residence and rent it out and not pay CGT for 6 years.

This is not quite correct... once you use your home to produce income, part of it may become subject to CGT.

Your main residence (your home) is generally exempt from capital gains tax (CGT). However, you cannot usually obtain the full main residence exemption if you:

• acquired your dwelling on or after 20 September 1985 and used it as your main residence
• used any part of it to produce income during all or part of the period you owned it, and
• would be allowed a deduction for interest had you incurred it on money borrowed to acquire the dwelling (interest deductibility test).

See link for an example...

http://www.ato.gov.au/individuals/content.asp?doc=/content/36910.htm

 

[xQuIz8]

Thanks again guys.

I've heard about the tax variation form but its good to have the copy now.
Thankss alot.
What I meant is to reside in the apartment in Melb CBD (Yes, its in VIC =)) for 6 months to comply with the FHOG. After that, I'll turn half into an investment therefore claiming 50% of the outgoings.
I dont know if what I am doing is feasible/profitable given my circumstances.

I have plans to see an accountant, but as mentioned, he is charging me AUD250 for 3omins for consultation (asking questions). Questions I'm asking right now! so therefore, do you guys think I should pay the money to see him ?

Also, I plan to use 20% deposit for a 450k property - thats 90k. If I have an additional 50-80k, would you guys recommend me to put it in an offset account? Or downpayment for a 2nd investment. Provided I can service the loan of course. I found a positive gearing one as a good prospect for the 2nd property, buts its a student accomodation in the city. Has a yield of 9%.
What do you think ?