Living in IP - Rules / Tax implications

[bth]

Hello

We have just purchased our 2nd IP and are going to live in it and rent our PPOR. Can you guys advise us ( or post a link as I am sure this would have been asked before ) what exactly the rules and regs are regarding this ie do we have to live in it for up to a certain amount of time ? and how will this affect our tax returns ? We are certain we will do this but is this in fact the right thing to do. Do we lose much financially?

Thanks for any help here

Regards

 

[buzzlightyear]

The biggest implications are around when and if you sell either property and thefore any capital gains tax liability.

Of course, when you rent out your existing PPOR you can claim all costs (eg interest payments, council & water rates, maintenace, depreciation etc....With your newly acquired 2nd IP (and future PPOR) you can claim all costs up until that time when you move in.

As per the scenario you mentioned, if you decide to sell either property in the future, you will be liable for the CGT, for the proprotional amount of time time they have used as rental properties. So you won't pay the full CGT on either, but you won't have one as being CGT free either (eg PPOR)

You won't be eligible for the 6 year CGT exemption rule on your current PPOR, because you have elected to take up another PPOR.

Whether you win or lose, will all depend on the numbers. Why are you moving into 2nd IP? Sounds like a lifestyle choice (?)