Hello, we bought a small unit last year and lived in it for 1 year (received first home buyers grant) and now moved into renting unit as we needed something bigger than that, now we have rented our own unit, I was just wondering if I have to pay tax against the rent I am receiving for my own unit(now that I am living at a rental unit and the rent im paying is about 30% more than my own unit)?? does the rent im receiving comes under second income? Also, I will be greatful if you could suggest about buying a second home/unit by taking one more home loan, is it wise to sell our unit first prior to buying the second or wise to rent it and buy the second??we couple are both working full time jobs with a very good pay (but do not have sufficient savings as we are clearing our credit card debts which will be done soon) what is the best option for us to get tax benefit in buying a second home? Kindly suggest!! Regards Pearls
Yes, the rent you receive will be income - even though you are paying rent yourself. But any expenses associated with the unit will generally be deductible against the rent. eg rates, insurance, interest on the loan etc. A major deduction many overlook is depreciation. Get a quantity surveyor in for a depreciation report.
Thank you so much for the reply, could you also please suggest on buying a second home prior to selling the first unit too. which way would be beneficial for us 1. selling the unit we own and buying other or 2. Renting the first one and buying second home Thanks again Regards, Pearls.....
Your first home can remain CGT free for up to 6 years while you are absent as long as you have no other main residence. Therefore if you buy a new home one of them will be subject to CGT. This is not necessarily a bad thing, but needs to be taken into account. Also you would probably need to borrow against the first house to buy the second. This would mean you have a high mortgage on the new main residence and therefore would be paying high interest which would not be deductible. Again this is not necessarily bad, but it may work out cheaper to sell the first one and buy the second one and the later invest in another investment property. It will all depend on the figures, your intentions and the future capital growth rates.
