When to time renos / revalue / DS

Seeking some advice about when to do what to maximize claimable expenses. The situation is as follows.

Property currently claimed as PPOR, will be turning to IP in December. Intentions are to claim as PPOR with the 6 month/6 year rule.

Have done a few cosmetic upgrades (paint, lawns etc) in the meantime which I understand is not tax deductible.

We are planning on putting in new kitchen cupboards, replacing the vanity unit and shower screen in bathroom, and replacing the flooring in all bedrooms, ideally we'd like to do this prior to tenants moving in so as to attract a better quality tenant and a great return. So when can/should we do this? Can we, whilst still residing there, sign an agreement with a PM for an intention to lease and commence renos + repairs and make them deductible?

Which also brings around the question of depreciation schedule. I presume the answer to this one is after all capital improvements are done.

The one I'm finding tricky though is the timing of the revalue. We are planning on holding onto it for a few more years after the 6 year rule expires, so we would not be exempt from CGT for increase in value after that, or so is my understanding. So do we revalue at the end of year 6 or in December this year when it is converted to an IP?

Thanks in advance!
 
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So when can/should we do this? Can we, whilst still residing there, sign an agreement with a PM for an intention to lease and commence renos + repairs and make them deductible?

None of the work you do now can be claimed as repairs. Even if you do it after renting it out for a little while, it's not repairs. You can only claim as repairs the cost of fixing things that deteriorate while you are renting the place out.

You will claim as improvements (2.5%) any structural stuff you do to the place.

If you put new carpets down in the bedroom, you will depreciate them.

You will also depreciate any existing assets: appliances, HWS, air con etc.
 
I'm confused by your last comment about "not holding" for more than the six years. I believe from reading here on the forum that if you move back in before the six years is up, establish it as your PPOR again, you can move out again and start another six year absence (assuming you are not claiming another property as your PPOR).

Check this, because it is only what I've gleaned from reading this forum.
 
Seeking some advice about when to do what to maximize claimable expenses. The situation is as follows.


<<Snip>>

Which also brings around the question of depreciation schedule. I presume the answer to this one is after all capital improvements are done.

The one I'm finding tricky though is the timing of the revalue. We are not planning on holding for a few more years after the 6 year rule expires, so we would not be exempt from CGT for increase in value after that, or so is my understanding. So do we revalue at the end of year 6 or in December this year when it is converted to an IP?

Thanks in advance!

For CGT purposes the key issue for a former PPOR is the value at the date the property first earns income. Sure you may propose to hold and sell within the six years and satisfy the absence from a former Main Residence exemption but if you go a day over the cost base will need to be considered. The cost base is the value on the day that the property first earns income.

The taxable future gain would be calculated by final sale price less selling costs less cost base (value on day of first rent) LESS any expenses you incurred which you didn't claim a deduction for (!!)...Pro-rata if you exceed 6 years...ie sell at end of Y7 means 1/14th will be taxable. (50% CGT discount)

Any costs you incur prior to first rent wont factor into much other than the depreciation schedule but may add to the cost base. However if you sell within the 6 years its exempt so makes no change. Its one of the mistakes some make - Pouring a ton of cash into initial improvements while its PPOR then they move out and want to claim some / all of it. Reality is that these costs may actually miss the cost base if they don't add to value and you sell within 6 yr. Even if you pass 6yr it may be trivial. Hopefully that adds to the IP value and raises the cost base. Certainly no revenue deductions !!

An example of a wasted cost may be gardens and lawns. Sure it pretties the place and may improve looks and also rent but likely little effect on income... does it add value ?? It doesn't add to cost base. Cant be depreciated. Instead if you paid a gardener to do it over time and keep the place in shape it may avoid deterioration and be deductible.

Yes get a QS report just before first rent.

Also don't overlook your existing loan and any borrowing costs. The total borrowing costs are deductible over 60months...Reduced by the PPOR period of course.
 
I'm confused by your last comment about "not holding" for more than the six years. I believe from reading here on the forum that if you move back in before the six years is up, establish it as your PPOR again, you can move out again and start another six year absence (assuming you are not claiming another property as your PPOR).

Check this, because it is only what I've gleaned from reading this forum.

Be careful with that view... More that just moving in for a short interval is required. Also check your land tax too.
 
I'm confused by your last comment about "not holding" for more than the six years.

That's because I hadn't had my coffee for the day and stuffed up. I meant to say that we weren't planning on selling within the six year mark. Sorry for the confusion.

The taxable future gain would be calculated by final sale price less selling costs less cost base (value on day of first rent) LESS any expenses you incurred which you didn't claim a deduction for (!!)...Pro-rata if you exceed 6 years...ie sell at end of Y7 means 1/14th will be taxable. (50% CGT discount)

This is essentially what I was after. Well summarised. I was under the impression that the cost base would have been the value of the property at the end of year 6. This changes things, and will have to plan accordingly.

Be careful with that view... More that just moving in for a short interval is required. Also check your land tax too.

I think we will be OK. The other half got a transfer for work, and its 110km+ away. I know some people commute that far and more, but its not for us.
 
Be careful with that view... More that just moving in for a short interval is required. Also check your land tax too.

I was trying to convey with my last sentence that the OP should check this, as it is just what I've read on here. I was hoping to convey that they need to do their homework and get it right.

From what I've read here on the forum, moving back in means actually doing just that, establishing the house as their PPOR, having mail and gas, electricity connected in their name and actually living there for some time (how long?) is what is required, not just "pretending" to move back in.

Is there some sort of timeframe that is acceptable I wonder? Stamp Duty reduction rules state a time frame, and so do FHOG rules.

I wonder if there is some timeframe that is acceptable for those who wish to move back in to reset the six year clock?
 
I was trying to convey with my last sentence that the OP should check this, as it is just what I've read on here. I was hoping to convey that they need to do their homework and get it right.

From what I've read here on the forum, moving back in means actually doing just that, establishing the house as their PPOR, having mail and gas, electricity connected in their name and actually living there for some time (how long?) is what is required, not just "pretending" to move back in.

Is there some sort of timeframe that is acceptable I wonder? Stamp Duty reduction rules state a time frame, and so do FHOG rules.

I wonder if there is some timeframe that is acceptable for those who wish to move back in to reset the six year clock?

I was reading about this the other day both on SS and ATO site.
I believe that you must physically move in with furniture etc, have bills in your name and be enrolled to vote at the address. Pretty sure it's for a period of 6 months minimum.
 
Seeking some advice about when to do what to maximize claimable expenses. The situation is as follows.

Property currently claimed as PPOR, will be turning to IP in December. Intentions are to claim as PPOR with the 6 month/6 year rule.

Have done a few cosmetic upgrades (paint, lawns etc) in the meantime which I understand is not tax deductible.

We are planning on putting in new kitchen cupboards, replacing the vanity unit and shower screen in bathroom, and replacing the flooring in all bedrooms, ideally we'd like to do this prior to tenants moving in so as to attract a better quality tenant and a great return. So when can/should we do this? Can we, whilst still residing there, sign an agreement with a PM for an intention to lease and commence renos + repairs and make them deductible?

Which also brings around the question of depreciation schedule. I presume the answer to this one is after all capital improvements are done.

The one I'm finding tricky though is the timing of the revalue. We are planning on holding onto it for a few more years after the 6 year rule expires, so we would not be exempt from CGT for increase in value after that, or so is my understanding. So do we revalue at the end of year 6 or in December this year when it is converted to an IP?

Thanks in advance!

Learn the difference between repair and improvement, it is up to you to prove that it was a repair not improvements. If improvements than you can claim depreciation only.
If you wish to claim capital works, then depends how much you will spend, a scrapping schedule (depreciation prior to getting rid of items) may be worthwhile, then after renovation a new depreciation is worthwhile when tenanted.
I am confused while you would need to revalue. If you plan to pull out equity, refinance or for buffer of extra money then you would revalue the property after renovation otherwise if you just plan to keep 1 IP or 2 then what is the point?
Perhaps, concentrating on growing your portfolio, would be more relevant. Talk to a property accountant to do the figures if you are unsure what is the best option for you. I basically just grow separate IPs portfolio, for those reasons, that the paperwork would be a nightmare, so you better be well organised. Good luck though!:)
 
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