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From: Mike .


Turning an IP into own home
From: Littlemaze
Date: 5/23/00
Time: 4:28:46 PM

I am considering upgrading to a bigger house and have found one. As it is not a great time to sell my existing house (townhouse with a summer feel) I was considering buying the larger house and renting it out for 6 months when I think I will get a better price for my existing house. I think I buy the new one for $260K and rent it out for $275pw.

The advantages that I can see are: tax deductions for: 1. the minor things I want to put in it (new shower screen, ducted gas heating (capital), tidy up garden), 2. stamp duty (house in ACT), 3. interest 4. capital allowance reasonable rental yield.

Disadvantages: CGT when I eventually sell, Quantity surveyor to get figures for capital allowance, tenant insurance.

Has anyone turned their IP into their primary place of residence?

Any comments, suggestions and advise would be greatly appreciated.

PS: have I got my advs and disadvs right?
 
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Bob

Reply: 1
From: Mike .


Re: Turning an IP into own home
From: Bob
Date: 5/24/00
Time: 12:46:49 PM

The deduction on stamp duty alone should be worth a refund of approx $3000. It will cover all your costs.

I don't know how CGT works these days, but it USED to be taken as a proportion of the time you owned the house eg. you rent it out for 6 months, and sell after 10 years, then the CGT is calculated on 1/20th of the capital gain.

Get an accountant's advice on this one, but in the ACT the first year is the really profitable one. :)
 
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Terry

Reply: 1.1
From: Mike .


Re: Turning an IP into own home
From: Terry
Date: 5/26/00
Time: 12:29:35 AM

You can only claim a proportion of expenses, i.e. six months rental equals 50% claim.

Any repairs must be related to the letting otherwise they will be considered capital in nature.

If you claim capital allowance then it lowers your cost base so you have a higher capital gain.

You can rent a house out for up to six years and move into it an establish it as your primary residence, therefore your current home will be CGT exempt when you sell (up to six years if you want to rent it out as well) and then the new house becomes your primary residence and gains CGT exempt status.

The ATO has their brochures on Capital Gains and Rental Properties available on their website which explain most of what they allow.
 
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