I have an IP on a corner block that has a run down granny flat at the rear. It is completly seperate from the main house and has its own entry from the street.
My in laws have had some really bad luck and are in a hopeless financial
position. We have offered them the use of this granny flat for as long as they want (probably for the rest of their lives, could be as long as 25 years) but they have to pay for the reno themselves and pay our council rates of $2k/year as "rent".
The long winded version of their situation is here:
http://www.somersoft.com/forums/showthread.php?t=56515
The reno would probably cost them about 30k as FIL is disabled and the granny flat will need to be converted for him with an internal ramp and a disabled bathroom and landscaping to suit him.
We had decided to do a basic reno at a cost of probably <15k and then could rent out for $250/week. But we would probably have to wait a year or two before this happens. I'm not sure of the value of the granny flat at the moment, how much of the purchase price of the whole property it was, probably no more than 10%.
What I need to know now is, if the in laws pay for the reno and upgrade to it, how does that affect our ability to claim the property in the tax return because without the granny flats income, it will be slightly negatively geared.
Should I get a valuation done before work comences to ascertain the % value of the granny flat to the whole property?
Will the taxation dept consider the granny flat to be bringing in $250/week even though the in laws paid for the upgrade and we are only getting $2k per year for the council rates? The place is un rentable without the work being done to it.
I dont know if this has any bearing on it but the in laws emigrated here 3 months ago on an elderly parent visa and will be getting a UK pension. They arn't entitled to any Australian government assistance, so I doubt if we can claim any sort of exemption (if it exists) for housing elderly parents at our expense.
I will run this by my accountant but I thought someone here may have some ideas or have been down this path themselves.
My in laws have had some really bad luck and are in a hopeless financial
position. We have offered them the use of this granny flat for as long as they want (probably for the rest of their lives, could be as long as 25 years) but they have to pay for the reno themselves and pay our council rates of $2k/year as "rent".
The long winded version of their situation is here:
http://www.somersoft.com/forums/showthread.php?t=56515
The reno would probably cost them about 30k as FIL is disabled and the granny flat will need to be converted for him with an internal ramp and a disabled bathroom and landscaping to suit him.
We had decided to do a basic reno at a cost of probably <15k and then could rent out for $250/week. But we would probably have to wait a year or two before this happens. I'm not sure of the value of the granny flat at the moment, how much of the purchase price of the whole property it was, probably no more than 10%.
What I need to know now is, if the in laws pay for the reno and upgrade to it, how does that affect our ability to claim the property in the tax return because without the granny flats income, it will be slightly negatively geared.
Should I get a valuation done before work comences to ascertain the % value of the granny flat to the whole property?
Will the taxation dept consider the granny flat to be bringing in $250/week even though the in laws paid for the upgrade and we are only getting $2k per year for the council rates? The place is un rentable without the work being done to it.
I dont know if this has any bearing on it but the in laws emigrated here 3 months ago on an elderly parent visa and will be getting a UK pension. They arn't entitled to any Australian government assistance, so I doubt if we can claim any sort of exemption (if it exists) for housing elderly parents at our expense.
I will run this by my accountant but I thought someone here may have some ideas or have been down this path themselves.