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PPOR with tenants!

Discussion in 'Real Estate' started by Muzza, 18th May, 2012.

  1. Muzza

    Muzza Active Member

    23rd Nov, 2006

    I have recently purchased a house as a PPOR which has tenants on a long term lease. Despite offering them a cash incentive to move they look set to stay the course of their lease which is some 9 months after settlement.

    I'm hoping that I can negative gear the property during this time but I am unsure of the consequences of this in regards to capital gains etc. What are the rules around capital gains on PPOR's that are rented for a period of time? I have heard that you need to live in it for 1 in 7 years but am unsure if this is true. The last thing I want is to claim deductions now and end up having to pay capital gains once I sell.

    If I can get around this I am hoping to claim interest, rates, water, management fees, insurance and maintenance as deductions but not sure about stamp duty, MI etc. Are these claimable upfront?

    Its quite possible that I need to see a decent accountant/tax agent, can anyone recommend one in Brisbane (south or city)?
  2. Terryw

    Terryw Well-Known Member

    9th Jun, 2006

    I won't be CGT free unless it is your main residence and it cannot be your main residence until you move in.

    But it is not that bad because CGT will only apply to the period it was rented as a percentage to your total ownership period. So the longer you hold it the lowere the % will be.

    eg. If they rent it for 1 year and you live in for 1 year and then sell then 50% of the time it was a rental and 50% of any gain would be taxable - but reduced by expenses and the 50% discount etc.

    If you sell after 10 years then only 10% would be taxable etc.

    see s118-185 ITAA 1997
    INCOME TAX ASSESSMENT ACT 1997 - SECT 118.185 Partial exemption where dwelling was your main residence during part only of ownership period