Turning PPOR into IP rented out at non commercial rates

[KJB]

Situation:

Currently in my PPOR of 2.5 years, as I work away and also partly live overseas I was going to convert it to an IP (just going to use the parents address as my new place of residence)

Have had my bro and his g/f living with me all financial year, I have and will continue charging non commercial rates until they're H&L package is ready in8-10months.(then ill have it rented out via a pm once they're out and keep it as an IP)

Questions:

This is what I'm going off from the Ato as far as deductions 'Generally, a deduction can be claimed for rental property expenses up to the amount of rental income received from this type of non-commercial arrangement'

which I understand but will the bills/rates/utilities still be 100% deductible ?

Also, what is enough evidence to prove I moved? ill change all the addresses on driver licence, insurances, banks etc. but is there a benchmark/point system to aim for?

Do I have to get any contract written up? or will the rental payments be evidence enough it is in fact an IP?

Will I get a full deprec refund come tax time if I get a QS out before EOFY? or will it have to be apportioned for the 11 months when I lived there too and not for the last month (June) when I move out and it is an IP. (


Anything else I should be considering, are missing or have got wrong??

(FYI loan is I/0 and rents/mortgage interest will go in/out of my offset for now (I know it lowers deductibility) however it wont be for long, setting up a LOC facility when I buy IP#2 in the next month or two)

 

[Terry_w]

i think the ATO statement is clear. You can only claim expenses up to the rent received. Bills won't be 100% deductible.

 

[KJB]

are non-cash deductions separate? still fully deductible?

 

[Terry_w]

are non-cash deductions separate? still fully deductible?

No not separate

 

[Paul@PFI]

Situation:

Currently in my PPOR of 2.5 years, as I work away and also partly live overseas I was going to convert it to an IP (just going to use the parents address as my new place of residence)

Anything else I should be considering, are missing or have got wrong??

Yes. You missed thinking about the CGT main residence exemption. This may also impact land tax depending on the property land value.

1. You can't live overseas and "use" parent address as a residence. A residence is where you actually live. This means that the CGT main residence exemption may be lost. However
2. The CGT main residence may have already been partially lost if you were earning income while occupied as your home. The portion occupied by them may already be subject to CGT.
3. The 6 year absence rule MAY apply but if you occupy another property you (or partner) own anywhere in the world then it may not be available

 

[KJB]

Yes. You missed thinking about the CGT main residence exemption. This may also impact land tax depending on the property land value.

1. You can't live overseas and "use" parent address as a residence. A residence is where you actually live. This means that the CGT main residence exemption may be lost. However
2. The CGT main residence may have already been partially lost if you were earning income while occupied as your home. The portion occupied by them may already be subject to CGT.
3. The 6 year absence rule MAY apply but if you occupy another property you (or partner) own anywhere in the world then it may not be available

thanks for the information guys,

in regards to using my parents house, I just thought it would be proof that I had moved out (and somewhere for my mail I'm a bit of a gypsy) also my situation has changed a bit, going to rent house out completely from 1/7 at the proper market rates and go gypsying on my RNR's.

So will I need a rental agreement signed and dated? the tenant will still be my brother so its not a huge deal with or without one. But will the ATO want a contract as evidence it was being rented? or will the weekly rent coming into my account be proof/record enough?