Moving into an investment property - tax implications

[DanielG]

Hi, I think I am safe but I wanted to get a confirmation from people on this board.

I have a house in QLD I am thinking of making my PPOR. Its been an investment property for 3 and a half years. I am in Sydney and I lived in my own PPOR back in 2007 for 6 months (to get the grant) but since then made it an investment property and have rented ever since.

Now I am thinking of moving into this house in QLD. Is there any tax implications for me? I dont think so as the 6 year rule doesnt apply to me.

The only negative thing could be paying down the mortgage and at some point turning it into a rental property and having the interest rate tax deduction lowered because I have since paid alot of the principal off, however, I have an offset account and can always just move funds around.

Is there anything else I should consider?

Thanks!

 

[coastymike]

QLD Property will be subject to partial cgt on sale.

Calculated as

total capital gain x (number of days rented out / number of days owned)

eligible for cgt discount of 50% is held more than 12 months

 

[DanielG]

Thanks Mike.

Ok so there is a capital gains but only at the time of a sale correct? No tax implications for me next financial year when I do my tax return? And no other implications if it reverts back to a rental property after, say, 3 years?

 

[DanielG]

With your formula there, dont understand how that works...

eg 50,000 * (1000/1000) = $50,000. According to the formula I would have to pay the entire $50,000 to the tax man or is that the amount that is taxable?

 

[marg4000]

The amount of the capital gain is worked out and added to your income for the tax year in which the contract to sell the property is signed.
Marg

 

[Dean2012ad]

- What you've suggested about paying down the property is one tax issue, but as you said using an offset account is the way to go to avoid said issue.

- Capital gains tax on eventual sale of both properties are some tax implications
(If its been more than 6 years since living in your "first home" than CGT will be payable on its eventual sale)

I have recently learnt that the costs of maintainance when the property is a PPOR can all be used to increase the cost base, thus reducing CGT payable.

See link with links http://somersoft.com/forums/showthread.php?p=1090462