I am buying my first house costing $500,000. I am getting the FHOG and will be residing at the residence for 6 months following settlement. I will then turn it into a IP and move back in with the folks. I will have a offset account (leaving another 100k in there) and will be paying interest only for the initial 6 months. Am i right in thinking that once i turn it into a IP the interest becomes tax deductible but while its my main residence i cant right?
Although once i move in i will need to replace alot of appliances and fixtures (eg. cooktop). I know i can depreciate these appliances but if i have the house as a IP for the first 6 months could i get all the money back or a tax deduction because its maintenance? (like if fence need to be fixed) What im trying to get at is what is the most tax effective way to actually renovate the house and replace all the out of date appliances? Also say i need to get the gas connected to a different point is all of that tax deductible if i make it as a IP first then my PPOR after the first 6 months?
Zman I am not an accountant but from what I know you cannot claim the replacement of appliances as repairs. You'll have to depreciate them over a number of years. In the case of the fence, if you replace a few planks etc it is maintenance but only if the damage is done during the rental period. If you've just bought an old place with a damaged fence and it needs repairs You can fix it, but the repair costs must be added to your purchasing costs and depreciated. The same applies if you replace the carpets, light fittings etc. Cheers
What if you add in things like wardrobes and such? Is it more tax effective to put the items in when its a IP than when its a PPOR or it doesnt matter?
Zman These are considered improvements so you can only depreciate them. Built ins and the like are not going to increase your rent but they will make your property more attractive so you will rent it out or sell it easier. On the other hand, if you install an airconditioner you can probably charge $10/week extra but again you will have to depreciate it. Cheers
