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Buy IP for parents to be tenants.

Discussion in 'Real Estate' started by bushy_71, 2nd Oct, 2013.

  1. bushy_71

    bushy_71 New Member

    Joined:
    2nd Oct, 2013
    Posts:
    2
    Location:
    Roleystone
    Hi All

    I am buying my second property for my elderly parents.
    They are going to rent this new property at a discounted rent rate.
    They are not going to sell their current house as this is a big decision for them and they need to time to sort out all their belongings.

    Furthermore, I am going to live in their current house rent free until they sell their house or rent it . It was either that or I charge them full rent and I pay them rent. I decided just to reduce the amount to be paid.

    Will this arrangement affect their pension?

    Will I be able to negative gear this property?

    Thanks in advance for any help.

    Bushy
     
  2. GregR

    GregR Reid Consultants

    Joined:
    13th Jul, 2009
    Posts:
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    Location:
    Berwick Vic
    I suggest you talk to a local FIS Officer from Centrelink, they will be better able to give you information on what affect it will have on your parents pension.

    In general, there are two tests, income and assets tests for pensions and as expected it is the lower level that will prevail.
    Their own home is exempt from the assets test while they live in it, but if rented out, it becomes a financial asset and rent will be included for the income test. Conversely they may be entitled to rent assistance if they are then renting.

    You can research this information on the Centrelink site to get an estimate but it will depend on other financial assets they hold.

    As to negative gearing for yourself, if the costs to hold including interest are greater than the rent received, then it will be negatively geared. I would be careful it is not too far from market rent however and that the key purpose is not to obtain a tax advantage.
    Greg
     
  3. Terryw

    Terryw Well-Known Member

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    9th Jun, 2006
    Posts:
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    Location:
    Sydney
    Yes, it will likely effect their pensions, but this will depend on a lot a few things as Greg has outlined.

    You won't be able to fully claim deductions if you are not charging market rents. You should see an accountant.

    Consider charging market rents and then making a gift to your parents every now and then.
     
  4. bushy_71

    bushy_71 New Member

    Joined:
    2nd Oct, 2013
    Posts:
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    Location:
    Roleystone
    Thanks for the advice.
     
  5. Pete Ramoza

    Pete Ramoza Active Member

    Joined:
    29th Jul, 2012
    Posts:
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    Location:
    Brisbane, Qld
    Some great advice as usual. I'd definitely speak to an accountant and/or lawyer just to make sure it's all kosher.