PPOR business. Loan interest deductible?

[ralph wiggum]

I am hoping someone can give advice on this situation.

My partner has been running a small business from a house she has been renting out. Myself and my partner have now decided to buy the property as our PPOR. My question is;
What part of the interest on the PPOR will be claimable as a tax deduction for the girlfriend's business?
The businesss is a family daycare, and takes up most of the house space between 8.30am and 5.30pm weekdays (except for the main bedroom).

My thoughts were that; only her portion of the interest is deductible if we were considered 50/50 ownership, and only the % of space that is used for business purposes. (approx 80% of the house). Therefore totalling approx 40% of total interest charged as a deduction.

Any thoughts or advice on this situation would be greatly appreciated.

Cheers

 

[Peter_Tersteeg]

People who work at home often can deduct a portion of the interest on their PPOR. The problem is that if you sell the property, you loose that portion of the capital gains tax exemption.

I deduct utilities (gas, electricity, even a bit of water), but not the interest for this reason.

 

[ralph wiggum]

Thanks PT
I wasnt aware of that.
So, using my example, the 40% of interest she would be claiming would mean only 60% of the property would be exempt from CGT on selling?

 

[tubs]

Correct, but I believe its only for the period of time that the business was operating. So if its only for 3 years, then you'd pay CGT on 40% of the growth for those 3 years.

Is her landlord aware that she's running daycare from their house!

Having said that, my old landlord has now rented his house out to somebody who's doing a similar thing. I can categorically say now that I would never take that risk.