What can I do with 2 yrs p/pd rent tax wise

[junemac]

Hi All

Have signed contract which is leased back to Developer for 2 yrs with rent for 2 yrs paid at settlement, with interest, dep ect it breaks even in the 1st year declaring the 2 yrs rent so can I claim the interest, dep ect in the 2 nd yr and have no income to declare thereby reaping the benefits then. Your thoughts and expertise would be greatly appreciated.

 

[Dazz]

All I can say is congratulations - what a cracking good position to be in.

2 years rent in advance....lovely stuff.

What to do tax wise ?? Why not go on a holiday and reduce your income this tax year, and come back refreshed next FY.

Have you got another IP you can quietly renovate yourself whilst taking some time off work - to add value whilst reducing your tax liability ??

 

[Sunder]

GAAP says income is credited to the period it is earned, not the period it is paid.

So if it's done properly, only half the income should be applied this year, and half next year.

However, GAAP is not tax law, so DYOR, what you propose might well be legal, if somewhat not accepted as good accounting practice.

 

[Player]

Hi junemac,

You do have a quality problem. Could you pre-pay interest on the IP loan to that period or equivalent term?

If not, as Dazz mentioned take some time off to reduce your taxable income further and recharge, replenish, holiday and learn a new skill, hobby, study etc.

 

[373au]

Hi junemac,

You do have a quality problem. Could you pre-pay interest on the IP loan to that period or equivalent term?

If not, as Dazz mentioned take some time off to reduce your taxable income further and recharge, replenish, holiday and learn a new skill, hobby, study etc.

Put the lot in an offset account against your PPOR.

Spud

 

[junemac]

Thanks, I am putting it into my ppor to almost get rid of mortgage but also to use as redraw if something else comes up. If I declare it all in 1st year it breaks even (no tax to pay) cos interest and dep is high but is it ok to claim no income but usual expenses (interest, dep etc ) in 2nd year cos that is going to be a lot off my tax bill in 2nd year

 

[WinstonWolfe]

If reduction of tax is your first consideration, and you have enough confidence in the market to have bought this place, I'd look around for another property.

You could also buy shares on margin and prepay the interest, though the share market will be a wild ride.