Issues when turning PPOR into IP

[AndrewS]

If I move out of my ppor and turn it into a rental property, can I claim the usual repair items as expenses as with normal IP's?

What about items such as replacing carpets (which I would have thought would be a depreciable item)?

What restrictions would I have if I return to live in this home? Is there a time frame that it needs to be available for rent? What happens to items that I have begun depreciating when I return?

On that matter, is there any merit in getting a QS report and begin claiming depreciation on other plant within the house.

Thank you for your help.


AndrewS

 

[WillG]

Hi Andrew,

If you turn your PPOR into an IP it is treated as an IP for the time it is rented.

Improvements or repaires made before it is turned into an IP cannot be claimed as expenses. Depreciable items such as carpets and window coverings can be depreciated; however if you put such items into your PPOR before you turned it into an IP they probably cannot be classed as 'new' items. A QS can probably assess the 'written down' value of these items.

Question:
"is there any merit in getting a QS report and begin claiming depreciation on other plant within the house ?"

Answer:
Depends on the age of the plant items and the cost of getting a QS report done. What sort of items are you talking about ?

Cheers

 

[Bargain Hunter]

Andrew,

There are some changes in regards to the CGT calculation when you go to sell (assuming you will sell.... eventually). This is based on the total period the property was held for and the usage over the period.

There are no real hangups in changing back and forward. As Will points out if you do want to carry out repairs wait until the property is rented, then the costs are tax deductable. Likewise when you want to move back in, carry out repairs prior.

Regards

BH

 

[depreciator]

Have a wade through TR 97/23 on the ATO site. This section is sort of relevant to you:

77. A deduction is allowable under section 25-10 if, when the repair expenditure is incurred in a year of income, the property is held, etc., by a taxpayer for income purposes:
(a) even though the property has previously been held, etc., by the taxpayer for non-income purposes; and
(b) even though some or all of the defects, damage or deterioration arise from, or are attributable to, the taxpayer's holding, etc., of the property before its holding, etc., for income purposes; and
(c) provided that the repair expenditure is not capital expenditure.

So there is some latitude for you to carry out repairs while the property is rented out even though the damage occurred while you were living there. People buying a property and then renting it out straightaway don't have this latitude with 'initial repairs'.

And yes, if you have recently recarpeted a written-down value will need to be put on the carpet as of the first available to let date.

Scott

 

[AndrewS]

Thanks for your replies. That has made htings a lot clearer. Now off to bed with some "good" reading material (ie TR 97/23 ATO).....Should be able to get to sleep very quickly.


AndrewS