My PPOR is now an IP.

[Ray Brown]

Hi all,

Until the other day, I had 1 PPOR and 3 IP's. Now that I've got tenants living in my PPOR, I guess I've got 4 IP's and no PPOR.

I can think of a few implications...

• Need a valuation done on PPOR now for CGT complications.
• Amount owing on PPOR is low, rent is high.
• How long can I live away from the PPOR and not have tax problems?
• I might buy another property and make it the PPOR.
• The current PPOR is not my idea of a good IP and I didn't buy it for investment.
• We wouldn't mind selling the PPOR but now its got a long lease attached.

What else?

 

[Cheeks]

Now I think the 6 year rule goes like this (but I'm happy to be corrected):

You can claim your old PPOR as your PPOR for a period of up to 6 years as long as you don't declare another PPOR in the mean time.

You can claim all rental expenses and depreciation on the property without incurring CGT (in my experience depreciation will be very low or nothing).

It is my understanding that when you plan to have a new PPOR you should get the old PPOR valued by a register valuer as a record of the price.

Once you claim a new PPOR or go beyond the 6 years the property will be liable for CGT but only from the date that it became a rental property, hence it's a good idea to get a valuation just before it changes from PPOR to rental in the eyes of Tax.

Please note I'm not a tax expert - I have an accountant for this

 

[Ray Brown]

... when you plan to have a new PPOR you should get the old PPOR valued by a register valuer as a record of the price.

Once you claim a new PPOR or go beyond the 6 years the property will be liable for CGT but only from the date that it became a rental property, hence it's a good idea to get a valuation just before it changes from PPOR to rental in the eyes of Tax...

I think you are saying TWO valuations might be required. One now as the PPOR becomes an IP, and another later when a new PPOR is purchased.

So I guess I still have a PPOR - its just got tenants in it.

 

[Les]

G'day Ray,

So I guess I still have a PPOR - its just got tenants in it.

If you are currently renting, I'd think the above is correct. And that situation can remain for up to 6 years as I understand it. BTW, not sure how you can claim depreciation, etc on your "new" rental in this situation...

Might need a worthy Accountant,

Regards,

 

[Ray Brown]

Thanks Les,

good point about the depreciation. I expect you would need a depreciation schedule to deal with the time that the house is being used to generate income. That doesn't seem to tricky.

The ATO says...
"You can claim a deduction for certain expenses you incur for the period your property is rented or is available for rent."
So it seems pretty straight forward.

The ATO also says...
"Under the uniform capital allowance (UCA) system, you can deduct an amount in relation to a depreciating asset that you held for any period during an income year, equal to its decline in value over that period. blah blah"

- depreciation will work normally I guess.


Its a bit of a bugger having so much paid off - with the positive cashflow coming out of the place generating a tax liability.

The rent I am paying however is not treated as a loss. It is a loss to me, I have to rent in a different town purely for work. (Exactly same job, different employer).

We intend to return to our PPOR as soon as we can...


Could I shuffle my borrowings around so as to increase the amount owing on the PPOR?

 

[Les]

G'day Ray,

The rent I am paying however is not treated as a loss. It is a loss to me, I have to rent in a different town purely for work. (Exactly same job, different employer).

We intend to return to our PPOR as soon as we can...

Could I shuffle my borrowings around so as to increase the amount owing on the PPOR?

Hehe - wanna buy another IP, Ray? Mate, you're stretching way outta my comfort zone - I'll stick with "Might need a worthy Accountant" (And I hope your new employer is paying you a bit more than the last one)

Ask your Accountant if a "Living away from Home allowance" might be valid....

Regards,