Negative gearing a subdividable property with a run down house

[somersoftfan]

I found a land that is subdividable. There is an existing house is not good for renting.

Can I negative gear the property till I subdivide the property? The house is in very bad condition to rent it out but I am happy to rent it out if somebody is ready to rent it?

If I subdivide the property and decide to sell one block to recoup some money, are there any advantages in selling the block with the house or new block?

 

[Aaron_C]

I found a land that is subdividable. There is an existing house is not good for renting.

Can I negative gear the property till I subdivide the property? The house is in very bad condition to rent it out but I am happy to rent it out if somebody is ready to rent it?

If I subdivide the property and decide to sell one block to recoup some money, are there any advantages in selling the block with the house or new block?

It depends. There is a fine line in these sort of situations between subdividing for capital gain (so capital gains tax and negative gearing may apply), or being in the business of subdividing, in which case it is business income and the trading stock provisions apply rather than capital gains.

 

[Shahin_Afarin]

Hi,

You cannot claim negative gearing benefits unless you have income from the investment vehicle (i.e. you are renting it out).

Even if you are able to rent it at $50 per week thats fine. The ATO may (unlikely but possibly) ask for please explain as to why the rent is so low in comparison to the property value.

RE your second question - you need to think about stamp duty and CGT.

Bottom line - speak to an accountant and have him explain these scenarios to you.

Do you currently have a PPOR or are you renting?

Shahin

 

[somersoftfan]

Yes. I have a personal property. Thanks

 

[matto_]

You cannot claim negative gearing benefits unless you have income from the investment vehicle (i.e. you are renting it out).

Wasnt there a recent ATO case which said as long as you are making reasonable efforts to rent it out then you can claim it?

 

[Blacky]

Wasnt there a recent ATO case which said as long as you are making reasonable efforts to rent it out then you can claim it?

It depends on the intentions of the owner - which can sometimes be hard to prove. If the property was rented previously, then vacant while you sought a new tenant, then yes, its fully deductible.

If you purchase the property and 'intend' on making it an investment, there are multiple ways of treating the costs during the initial period. Sometimes you can claim it as negative gearing sometime you offset the cost to reduce your capital gain when you sell.


Confused yet? hope so - speak to your accountant.

 

[Shahin_Afarin]

Wasnt there a recent ATO case which said as long as you are making reasonable efforts to rent it out then you can claim it?

I wasn't aware of that but do we (as an investor) really want to go there?

Last thing I would want is for the ATO to call me and say why haven't you been able to rent out the property all year?

 

[Aaron_C]

Like I said - if you want to claim it as a deduction in the year for a derelict, unrentable house, you may have to apply the trading stock provisions. Only problem is you lose any CGT discount.