We are planning to buy another house to live in and turn our home (which is paid off} into an investment property.
How can this be done?
Unfortunately the new house you buy will have a loan that is not tax deductible, while your current PPoR has no debt.
Ideally, you would want to have the PPoR with no debt and the IP with all the debt as it is tax deductible. It may be financially better to sell the current PPoR, use the funds to buy an new one, and it will have no, or little debt. Then use some of the equity towards an IP. The problem is there will be selling and buying costs which will chew up a bit of the equity you have, but ultimately you will have a tax deductible debt, which will probably offset the transaction costs.
You don't have to do anything at the moment to start, except start keeping records of all the expenses and income (rent) from when you advertise it for rent.
All the expenses are tax deductible against your earned income and the rent is added to this to give you a new taxable income.
This may mean you end up having a tax bill at the end of the year, but it won't be large, and it's a good problem to have; you're making money.
Make sure you get Landlords' Insurance (costs around $200 per year and is tax deductible), you won't need as much contents insurance, but you'll still need building insurance and public liability. Talk to an insurance broker for these things.
If the house was built after 1987, you will have depreciation from the bulding, fixtures and fittings which can be claimed as tax deductions. You will need to have a Depreciation Schedule prepared by a Quantity Surveyor, at a cost of around $500, but it will pay for itself in the first tax return.
You will need a good accountant versed in Property Investing.