Mortgage Advice

[anniswan]

I have inherited a property without a mortgage and I am now ready to rent it out. The title is solely in my name.

My residential property has about $120,000 owing on it, I work part time and am a carer of an aged parent where I get a small payment from Centrelink.

I know that the rental that I get from the inherited property will be considered income which will affect my carers payment and taxable income.

Can I refinance with a bank to pay off my home then treat the rental property as an investment. I have been told that this is not allowable, but surely there must be a way around this.

Any advice appreciated.

 

[Propertunity]

The short story is that you cannot refinace the debt-free inherited property (now an IP) to pay off your PPOR and then claim the loan as a tax-deduction against the IP.....as it is used for a private purpose.

You could sell the inherited property, pay down your PPOR loan and go buy something else using the remaining funds as a deposit. This new loan would be tax deductibale.....but this rental income may affect your pension also - ask Centrelink.

Why don't you just enjoy the rental income and forget about relying on the government for anything?

 

[anniswan]

Would I be wise to look at forming a family trust then? This stuff is very new to me

 

[Propertunity]

Would I be wise to look at forming a family trust then?

For the purpose of....?

 

[Evachange]

From the ATO point of view the purpose of the funds is for private use, as has been already indicated.

So yes you WOULD not be able to claim the interest, all you would be doing is moving your debt.

Regards,

 

[anniswan]

spreading the tax burden, sorry to sound naive but as I said I am new to this stuff. I am not ready to sell the property due to sentamental reasons, and am not looking at defrauding centrelink, happy to forego my centrelink payments but am concerned about the tax implications

 

[Propertunity]

anniswan, as I understand it, you have 1 x inherited IP with no debt and a PPOR with only a $120K debt. You do not form a family trust for the purpose of 'spreading the tax burden' and in so doing, pay $1,000's for the trust set up and accounting fees forever, just to qualify for a piddling Centrelink payment.

In an ideal world, the inherited property would have gone into a testamentary trust rather than into your name specifically, but that point is closing the gate after the proverbial horse has bolted.

You need to obtain specific accounting advice for your own situation. Depending on how long ago you inherited the property, you may have some CGT free time left to structure things.

 

[anniswan]

OK to further complicate the issue the house was left to me in the will. however there was a condition, and that was that my mother can have sole use of the property if she wants it until she dies. At the moment she can't move into the property, however she is wants it kept incase she can move back there. This is all becomming too hard!

 

[Propertunity]

You need to get both your accountant and your lawyer into the same room at the same time along with yourself and have a discussion about what you can do moving forward......then the path will become clearer.

 

[JohnJC]

Depending on the age of the property, why don't you get a QS report done. At least you're going to reduce the taxable income a bit.

JC

 

[RumpledElf]

You might already be disqualified from the pension, you have to declare the house as an asset and you'll lose pension for every dollar over the (rather low) asset limit.

Fill in a Mod R for centrelink but don't expect them to actually read it. I put in two for my vacant block and neither got processed. Idiots. But they happily took a big slab off my parenting payment because of the rent for the house I just sold.