Hi, I have a question........ I have a mortgage and live in my home and have done for 7 years now. I would like to know if I leave and rent an apartment instead, so pay rent where I will be living and also pay my mortgage payments as usual, and rent this house to my daughter, can I claim the loss of rent to mortgage and maintanence etc. when I do my tax return next year ? I realise that most people live in their homes then buy a second to rent out for this purpose, but I was wondering then, if I could benefit tax wise, by doing it the way I have described? Thanks for any advice or information.
You can do that but will pay capital gains tax for the period you are renting it out for. It is possible though that the value of your property will not have any appreciation in that period but you'll need to justify this to the ATO by gettng a written valuation ( and keeping it) at the beginning and at the end of the leasing period The move in valuation has the additional advantage of locking in the maximum value. Your place at that time will be in top condition ( before it gets trashed by the tenants ) so if that valuation is lower than your 2nd valuation and you sell the asset at the end of the leasing period for a lower price you have suffered a loss which can offset other capital gains. In the situation where you rent the place to your relatives you'll have to watch the rent you are charging. It will have to be similar to what other people are paying for similar properties In this case because your tenant will be your daughter and she is looking after the place you could probably get away with a $20/w discount but any more than that could be flagged by the ATO. I am guessing that the ATO software would be tracking people's rental income per property and will flag significant rent differences on the same street
If you move out of your PPOR and rent it out as an IP and don't buy another property to live in as your PPOR (ie you rent instead), then you can continue to claim the CGT exemption on your ex-PPOR for up to 6 years from the time you move out. If you subsequently move back in to the property (for a reasonable period of time), the 6 year period resets and you can then move back out again and get another 6 years CGT free. If you don't move back in within 6 years, you should get your property valued at the 6 year mark - this then sets a CGT baseline ... you will pay CGT (when you sell) on any growth in value above this baseline. As Bill mentioned - make sure you are charging market rent (or close to it) if renting to a family member (get some appraisals done by PMs), else the ATO may disallow some of the deductions or ask you to apportion them between private and investment usage.
more questions if possible oh wow not that straight forward or easy then thanks for replying i was going to only charge my daughter 300 a week which is what i will have to pay for my rent so my financial outlay doesn't change and they have a secure place to rent Renting in this neighbourhood would probably roughly a hundred or two more than that but unsure. i have lived here for 7 years so after they finish wanting to rent here i would move back in, not sell..........would that make a difference ? perhaps there is something i could claim through doing this but not the entire deductions most people claim when negative gearing...............?
It's easy enough to do - and you can charge what you like for rent ... just be aware that you won't get to claim all of your expenses and interest costs as deductions if you are charging below market rent. Something is better than nothing I guess. If you don't have a good accountant - get one. Ask their advice before you move out.
thank you so much for that information i will get valuation before i move out and ask my accountant what deductions i should claim rather than get the ATO upset with me - just want to help my daughter out during rough times for them and a change might be good for me for awhile too thanks again
Nivvy I think the point Sim was making is that you don't need to declare it as a rental if your daughter stays there and only pays the mortgage etc. The other point as Sim rightly pointed out if you don't have another property to claim the 6 year PPOR exemption there won't be any capital gains tax so 1. you won't need to do valuations. 2. you won't pay any capital gains tax for 6 years If you continue to rent it after the 6 years you can do a valuation then I think you'll need to sit down and work out what's best for you.
