Renting out PPOR and claiming interest tax deductions

[JBR]

Hi all,

Hoping I might run this past the brains trust....

The scenario is: The girlfriend buys a property as an Owner Occ, borrowing 95% LVR, claims the FHOG, lives in it for 6 months to meet SRO requirements... She then moves out and rents the property out...

The questions is can the interest on the mortgage be claimed as a tax deduction once it is converted to an IP?

My understanding is that given that the initial loan purpose was for personal use and not investing then the loan interest can not be claimed at any future time. I'd love to be worng...

Can I trouble anyone for an opinion on this?

Cheers
JBR

 

[dantheman]

Is the loan 100% used for purchase of the property? Ensure you don't make any personal-use redraws..

This thread answers the question in more detail: http://www.somersoft.com/forums/showthread.php?t=37212

Cheers

 

[BayView]

Hi all,

Hoping I might run this past the brains trust....

The scenario is: The girlfriend buys a property as an Owner Occ, borrowing 95% LVR, claims the FHOG, lives in it for 6 months to meet SRO requirements... She then moves out and rents the property out...

The questions is can the interest on the mortgage be claimed as a tax deduction once it is converted to an IP?

My understanding is that given that the initial loan purpose was for personal use and not investing then the loan interest can not be claimed at any future time. I'd love to be wrong...

Can I trouble anyone for an opinion on this?

Cheers
JBR

Yes. (we are doing this right now).

Once you convert it to an IP, you can claim all the expenses associated with holding the property - including the depreciation if the property was built after 1987.

The expenses can be claimed from the day you advertise it for rent. Even the ad costs are deductible.

You can use your PPoR as an IP for 6 years before it becomes liable for cap gains tax.

 

[Gatoblanco]

clarification pls

Once you convert it to an IP, you can claim all the expenses associated with holding the property

What constitutes 'converting it to an IP'?
Moving out and renting it out?

 

[BayView]

Once you convert it to an IP, you can claim all the expenses associated with holding the property

What constitutes 'converting it to an IP'?
Moving out and renting it out?

That's it - making it a rental.

Keep good records of the start and finish date for when it is a rental - from the first ad to get a tenant, to the day the tenant moves out before you move back in.