Tax implications : Renting out first home for initial 6 months

Hi Everyone.

We have just got verbal acceptance on our first property! I have some questions I hope someone can help me with.

We plan to live in this property for 3-5 years before turning it into an IP and moving elsewhere. However we need to rent it out for the next 6 months. So its going to be going from an IP for 6 months, PPOR for 3-5years back to IP.

What are the tax implications with this? Can we still claim tax deductions for the initial 6 months we rent it out?

Is there anything special I need to do with my loan to ensure we dont have any tax issues? E.G should I be going interest only? Do I have to open a new account for the rent to be deposited into?

Thanks, any input would be appreciated.
Andrew
 
Hi Everyone.

We have just got verbal acceptance on our first property! I have some questions I hope someone can help me with.

Congratulations

We plan to live in this property for 3-5 years before turning it into an IP and moving elsewhere. However we need to rent it out for the next 6 months. So its going to be going from an IP for 6 months, PPOR for 3-5years back to IP.

Good plan.

What are the tax implications with this? Can we still claim tax deductions for the initial 6 months we rent it out?

I believe so - but not for the second six months.

Is there anything special I need to do with my loan to ensure we dont have any tax issues? E.G should I be going interest only? Do I have to open a new account for the rent to be deposited into?

Set it up as a interest only loan with offset account. Put any extra repayments into the offset account. When you turn this place into an IP simply withdraw the cash from the offset account for your deposit on the new PPOR. Then the interest on the original loan will be tax deductable.

Do not fall into the trap of thinking that a redraw facility on your loan is the same as an offset account. It isn't, and the tax consequences in your situation are significant.

Regards,

Jason
 
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