Renting out rooms and tax implications?

[mrfish]

Hi, Also posted this in the General Forum, but didn't get any response, so trying my luck here, thank you very much!

What's the tax implication (CG not income tax) for renting out all rooms other the one I am occupying in a PPOR?

Let's say, in a 3 bedroom house, if I rent out 2 rooms for 6 months period, then renting the whole house out while not claiming any other property as PPOR, then say 5.5 years later I sell the house, will the CG be totally tax free?

The current plan is that I am going to occupy my new house for the initial 6 month period to make it a legit PPOR then will rent it out and simply trying to recycle the "6 year rule" by going back for 6 months every 6 years.

Thank you in advance

 

[Pat]

Hi Mr Fishy,

There would be a a capital gain on two thirds of the property while you had tenants in two thirds of the house. If you then occupied on your own for 1 year and then left it for 5.5 years you would total up the years between when you first went in and the date you sold it at the end of the 5.5 year period and you would pay two thirds of 6months divided by the time you had the house.

Hope this makes sense.

 

[coastymike]

If the people are "boarders" then the income will not be assessable and if you have no assessable income then no deductions will be allowed.

Taxation Ruling IT 2167 considers the consequences of different rental income producing situations. Paragraph 18 of IT 2167 states that:

"Situations arise where the owner of a residence permits persons to share the residence on the basis that all the occupants, including the owner, bear an appropriate proportion of the costs actually incurred on food, electricity etc. Arrangements of this nature are not considered to confer any benefit on the owner. There is no assessable income and the question of allowable deductions does not arise."

 

[mrfish]

thank you..but....

Thanks alot for your quick response!

@Pat: it sorts of made sense, do you mean I will be up for Total CG x (1- 2/3 x 1/12 (half year))? in CG Tax?...but hey, it's my PPOR! so it shouldnt!...anyway...

@Coasty: I think my situation is more like: I want to treat this house as my PPOR(hence need to occupy for 6mths first), but because I got elsewhere to live for the time being (say generous & lonely parents), I want the house to generate income rather than sitting empty. Hence, 1, I want to rent out other 2 rooms during my first 6mth of stay, 2, renting out the whole house as soon as residency requirement is satisfied, for a period of less than 6 yrs as per "6 year rule" then going back for another 6mths to satisfy residency requirement again, then renting out again....so on and so forth..

Does this sound like a workable solution? And, maybe I should have put it this way, what's the tax situation like in general? I figured I'd be up for income tax for the rent it generates, but no CG tax...

Thanks again