**Reply:** 2.1.1.1.1.1.1

**From:** Dale Gatherum-Goss

Hi Mark!

"if you purchase a premises as an owner occupier(lets say a two bedroom unit for ease of explanation), and you rent one

bedroom out (rent, board or whatever) you can declare your unit as being half for

investment purposes and therefore claim half the related tax and depreciation breaks the unit."

Yes, this is correct. Your own unit, or home, will be shown on your tax return as being an investment property if you have a boarder or tenant.

"(and pay CGT on half the profit if sold).

Is that correct?"

Sort of. As your PPOR, it is exempt from CGT even if you receive an income from the property in rent.

"Am I right in assuming this includes half

the interest payments on the loan?"

Yes, you are.

"If that is all correct I'm not quite clear what happens if the second room then becomes

vacant. Say you can't find a suitable tenant/flatmate . Does the unit remain for the purposes of tax assessment etc half owner occupied and half investment forever. So in other words is the second bedroom treated as a vacant investment bedroom so to speak for the life of your ownership?"

You have control of this situation. So, if you can prove that whilst the 2nd bedroom was vacant you were actively looking for a tenant, then, the share of the expenses can remain as a tax deduction. However, if you cannot prove that you were actively looking for a tenant, then, I would not try to claim these things as a tax deduction.

"Or can you only treat the half of the unit as an investment for the period it is occupied by a tenant? If this is the case the CGT calculations would be very complicated wouldn't they."

I hope that I've answered this already. Yes, CGT calculations can be quite messy and complicated, but, they're not that hard when you know the rules.

"Sorry it's so long."

Don't be silly, it is important to get your mind around some of these issues and I'm glad you asked.

Have fun!

Dale