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Primary residence to IP?

Discussion in 'Accounting, Tax & Legal' started by ialienam, 29th Jan, 2009.

  1. ialienam

    ialienam New Member

    Joined:
    29th Jan, 2009
    Posts:
    2
    Location:
    sydney
    Hi

    I am new here, and I have my current unit fully paid off (well..not realli, I still owe my parents money..but it's under my name, and no "mortgage" attached to it).

    However, I am about to purchase my next property, as I want to get a bigger one for myself n family in the future, since the interest rate is low etc.

    Now..here's the problem, I don't wanna to sell my current unit, as I will not get a good price..It produces very good rental return (about 5.5% - 6% I believe)..I know I can borrow money against my current one as the deposit n purchase the next one.

    If I use my next PRO as an investment, great it's tax deductible. But instead I rent out my current one and move to the new one...It's not taxdeductible anymore...but I have heard ways of getting around it...Is it true?

    One more thing, if someone purchases a house here and get the first home buyer grant... Use it as a primary residence, but is going away oversea for 12 months right after the settlement...Is it still possible to get the grant??(by having the letters and bills post to the add...but the person is now away to oversea)..

    Thanks in advance
     
  2. Jacque

    Jacque Team InvestEd

    Joined:
    16th Jun, 2005
    Posts:
    1,885
    Location:
    Sydney
    Good strategy, especially given the fact that you sound as though you have a decent amount of equity in it.

    Let me clarify here. You want to buy a bigger PPOR to live in and then rent out your old one? This is perfectly feasible as the old PPOR then becomes an IP for which you're entitled to tax deductions. However, you are still liable for CGT when you sell the unit, as you can only ever have one PPOR at a time.
    See this recent thread for further information: http://www.invested.com.au/6/6-year-ppor-cgt-exmeption-34907/

    There are minimum requirements you need to adhere to in order to qualify for the grant. You need to produce evidence that you've lived in it for a minimum period of 6 mths within 12 mths of purchasing and this is usually verified with connection bills such as electricity, phone etc.
    Check with your accountant or the osr for exemptions if unsure. More information in this factsheet http://www.osr.nsw.gov.au/lib/doc/factsheets/fs_fhb1.pdf