House purchase - next steps?

Hi all

We recently purchased a house in Canberra, and I'm hoping for Forum views on the steps we need to take now to ensure a good tax outcome on the property.

The property is currently tenanted, and may remain so for the next 12 months. While we intend to make the property our PPOR, there are some tax advantages to the current arrangement.

(1) do we need a valuation on the property for future tax purposes (CGT, etc)? We didn't do this prior to buying (at auction) and the bank has advised that they didn't undertake a valuation for the purposes of our loan (which was a bit of a surprise - tho we think we bought well).

If so, what is the most cost effective way of doing this?

(2) should we organise a depreciation schedule? The house is around 45 years old, although some of the fittings and fixtures, particularly the kitchen, are a bit newer (the bathrooms and other aspects are close to original).

If so, how do we do this in a cost effective way? (we expect to get quite small deductions given the age of the house).

(3) are we obliged to retain the current PM, with whom the existing lease we have taken over has been signed? There is over a year to run on the lease, so we may want to shop around a bit (grateful also recommendations on PMs covering the Woden Valley area).

(4) what other bases do we need to cover to maximise our tax outcome and ensure the process is relatively smooth at tax time?

thanks so much in advance!
 
Hi Monkey,

Great profile pic! Always good to see another Canberran on board.

Hi all

We recently purchased a house in Canberra, and I'm hoping for Forum views on the steps we need to take now to ensure a good tax outcome on the property.

Congrats on the purchase - the market is hot at the moment and it doesn't look like slowing down anytime soon.

The property is currently tenanted, and may remain so for the next 12 months. While we intend to make the property our PPOR, there are some tax advantages to the current arrangement.

(1) do we need a valuation on the property for future tax purposes (CGT, etc)? We didn't do this prior to buying (at auction) and the bank has advised that they didn't undertake a valuation for the purposes of our loan (which was a bit of a surprise - tho we think we bought well).

If so, what is the most cost effective way of doing this?

I don't think so. If it's going to become your PPOR then you will be exempt from paying CGT when you sell it. If you do decide to keep it as an IP then it would be best to get a valuation carried out to avoid any contention with the ATO in the event that you sell and have to pay CGT.

You can "google" for a local valuer, check the yellow pages, etc. It will likely set you back $200 - $300.


(2) should we organise a depreciation schedule? The house is around 45 years old, although some of the fittings and fixtures, particularly the kitchen, are a bit newer (the bathrooms and other aspects are close to original).

If so, how do we do this in a cost effective way? (we expect to get quite small deductions given the age of the house).

A tough one. If the property is only going to be an IP for a year than you can only depreciate the fixtures/fittings for one year. A depreciation schedule might set you back about $400. I would fill out an online depreciation form to get an idea of how much you would be entitled to depreciate in the first year - if it looks like the depreciation will be higher than the $400 outlay than it will be worth it - we're not talking huge savings here though if it's an IP for only one year.

(3) are we obliged to retain the current PM, with whom the existing lease we have taken over has been signed? There is over a year to run on the lease, so we may want to shop around a bit (grateful also recommendations on PMs covering the Woden Valley area).

I can't see why you would have to keep the same PM. You could honour the remaining year of the lease and self manage (if it's only for a year and the tenants have already been placed then this might not be a bad option).

(4) what other bases do we need to cover to maximise our tax outcome and ensure the process is relatively smooth at tax time?
Take out an IO loan with a 100% offset as opposed to a P&I loan. When it becomes your PPOR, you can park any extra cash you have in your offset account. Get a good accountant that is IP savvy.

thanks so much in advance!
 
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