Living in 2nd PPOR/IP part-time - can I claim interest on tax?

Greetings,

This is my first post here, but I have spent some time reading through the forums.

I have read through quite a lot of topics regarding tax and IPs but I cannot find information on a particular situation that I am thinking about entering:

Background:
I live in Mackay, QLD (with wife and child) with a mortgage on our house with low equity (we purchased October 2006 at top of market, little to no capital growth since then). We have renovated which has increased the property value some. We have a standard variable loan with 100% offset A/C. The wife works full-time, but could be off work on maternity leave at any time in the next few years. Our collective income is ~$170K

I am to begin work in Bowen (2 hours drive north, half way to Townsville) and am thinking about purchasing a property in Bowen early next year (need time to collect a decent deposit). Bowen is at the top of its market, maybe sliding a little in price. Average modern 3 bed home is about $350K list price currently. Modern 1/2 bed unit is ~$300-320K. I would stay there Mon-Fri, returning home to Mackay on weekends.

I want to live in the house (effectively, my second PPOR?) and rent 1 or 2 rooms out to other workers in town (travelling to Bowen to work is pretty normal, and will increase in popularity with local coal terminal expansion works).

I understand that the rent from boarders will be declared taxable income, but I want to know if I am able to claim the interest payments on this second property on my personal income tax, as per normal investment expense claims? (and if so, how I need to/should configure the loan to achieve this) Or, if by me living in it, I destroy any chance of legally making such a claim?

Between the rent from boarders, and claiming interest back, I could almost live there rent free, at the same time paying off my first IP. This sounds to good to be true, which is why I am guessing that it isn't?

Also, do you think there is grounds for claiming travel expenses for working away from home, when I am camping in my own IP for 4 nights per week? I am guessing not, but I honestly don't know where to start looking for information regarding this.

I've seen some contributors here who really seem to be on their game, so I am keen to get your input.

Thanks very much for your time. I appreciate any help you can give me.

Paul
 
Greetings,

This is my first post here, but I have spent some time reading through the forums...
Welcome, Paul!


I understand that the rent from boarders will be declared taxable income, but I want to know if I am able to claim the interest payments on this second property on my personal income tax, as per normal investment expense claims? (and if so, how I need to/should configure the loan to achieve this) Or, if by me living in it, I destroy any chance of legally making such a claim?
Sadly, you are right. No deductions. There is no such thing as a "second PPOR" by the way. The ATO allows you to claim one at a time

Also, do you think there is grounds for claiming travel expenses for working away from home, when I am camping in my own IP for 4 nights per week? I am guessing not, but I honestly don't know where to start looking for information regarding this.
I think you've guessed right again. If you are an employee you can't claim travel to and from work either.

I don't know the area but why are you so keen to buy there when you think it's at the top of the market? One possible scenario would be for the IP to be in your wife's name & you could pay her market rent, along with whomever else you're sharing with. Of course, this would only be useful from a tax viepoint while she is working.
 
Greetings,

This is my first post here, but I have spent some time reading through the forums.

Welcome!

I understand that the rent from boarders will be declared taxable income, but I want to know if I am able to claim the interest payments on this second property on my personal income tax, as per normal investment expense claims? (and if so, how I need to/should configure the loan to achieve this) Or, if by me living in it, I destroy any chance of legally making such a claim?

You are able to claim a PORTION of the interest/water/rates etc. These expenses are usually apportioned on an floor area basis. These have to be apportioned between rooms which are only used by you or the renter (bedroom) and rooms which are shared between you (loungeroom).

This is confirmed by Taxation Ruling IT 2167. See the "Arms length letting of an identified part of a residence" section. http://law.ato.gov.au/atolaw/view.htm?docid=ITR/IT2167/NAT/ATO/00001

Also, do you think there is grounds for claiming travel expenses for working away from home, when I am camping in my own IP for 4 nights per week? I am guessing not, but I honestly don't know where to start looking for information regarding this.

I would have to say - no. Try crawling through the Travel Expenses section of the ATO website.

Thanks very much for your time. I appreciate any help you can give me.

Not a problem. Anytime.
 
I know its late, guys, but thanks for the information you posted.

This situation did not and will not eventuate, so nothing to worry about.

Thanks again.

Paul
 
Back
Top