Hi all,
My friend and I have a talk over lunch yesterday and I just felt a bit strange about what her accountant did.
My friend bought her principle resident 2years ago and pay P&I for it. Last financial year her accountant suggested they could do something with her cash flow by turned part of her house into investment so she can claimed tax back. Now on the paper only her brother will rent 1 room and because it’s negative gearing she will be able to have some cash back from tax men.
My question is What is the pros and cons of doing this? In short term she have more cash return but what are the hidden disadvantages? If she sells her house would part of it become subject to capital gain? She’s doing depreciation on her house for above purpose. Does everyone do that too? To my understanding that you have to pay back what you claim on depreciation once you sell the house, and is there any other reasons to do it on your own house ?
Thanks for your input
My friend and I have a talk over lunch yesterday and I just felt a bit strange about what her accountant did.
My friend bought her principle resident 2years ago and pay P&I for it. Last financial year her accountant suggested they could do something with her cash flow by turned part of her house into investment so she can claimed tax back. Now on the paper only her brother will rent 1 room and because it’s negative gearing she will be able to have some cash back from tax men.
My question is What is the pros and cons of doing this? In short term she have more cash return but what are the hidden disadvantages? If she sells her house would part of it become subject to capital gain? She’s doing depreciation on her house for above purpose. Does everyone do that too? To my understanding that you have to pay back what you claim on depreciation once you sell the house, and is there any other reasons to do it on your own house ?
Thanks for your input