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A tax deductibility question

Discussion in 'Accounting & Tax' started by Arcticfire, 6th Aug, 2015.

  1. Arcticfire

    Arcticfire Well-Known Member

    Joined:
    28th Jun, 2015
    Posts:
    71
    Location:
    Newcastle
    Hi there

    We are looking at moving into a investment property we own

    It is a block of 3 units with one 3 bedroom apartment upstairs and 2 identical 2 bedroom apartments downstairs

    The block is on one title - not strata

    We still have a active loan on this property which we obviously currently claim 100% of the interest as a tax deduction

    The intention is to move into the upstairs apartment and continue to rent the down stairs apartments out

    I was wondering how this would work from a tax deductibility point of view

    Would the loan then be 50 % tax deductible as the upstairs apartment is about 50% of the total floor space.

    Or is it worked out differently ?

    Also after we move in, any repairs to the property - would it be proportioned the same way ?

    ie if the ceiling needs painting in my unit can I claim 50% of the cost or because I live in this unit I can't claim any of it.

    Also if the reverse occurs - a repair is required in one of the downstairs unit is the entire cost tax deductible or only 50%

    Thanks in advance
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Since 1 title you would have one loan and have to apportion based on area. Any expenses would need to be apportioned too. But an expense relating solely to the rented portion may be deductible in full.
     
  3. Arcticfire

    Arcticfire Well-Known Member

    Joined:
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    Location:
    Newcastle
    Thanks Terry

    Does that also mean that a exspense solely related to my unit ( the one I am living in ) is not claimable

    Eg if the carpet needs to be replaced

    Cheers
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Sounds like a personal expense to me.
     
  5. jrc

    jrc Well-Known Member

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    Subject to issues such as initial repairs etc it might be possible after the tenants leave the top flat to do some deductible repairs if you have received income for that flat in the same financial year. Get professional advice.
     
  6. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Location:
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    Replacing the carpet may have the following tax issues
    1 Its not deductible. Its just depreciable
    2. The former carpet may be scrapped before you move in (Check QS report for residual value)
    3. The new carpet depn is not deductible
     
  7. Arcticfire

    Arcticfire Well-Known Member

    Joined:
    28th Jun, 2015
    Posts:
    71
    Location:
    Newcastle
    Thanks for the Help - Terry ; JRC and Paul !