Buying a house for PPOR but IP 6-12mths first

I live in NSW.

Can someone help me with the tax ramifications of buying a house, but then renting it out from the start - for 6 to 12 months, then moving in?

1. Will land tax be payable? (Land tax calc is at ~10k a year ) Is there any way around this if yes?

2. When I move in to it, do I need a valuation done?

3. Is CGT payable when I sell it (many years later) for this period it was an IP?

NB: I do not currently own any property, so this will be the only one I own. The main reason to rent it out first is that I need the rental income taken into account to get the loan and waiting on a few other major expenses I have to be finalised.

It will be owned in my own individual name (solo).

 

1. Yes, pro-rated down to the time its an investment

2. Yes for future CGT calc

3. Yes, but pro-rated down to the time it was an investment.

This is all in laymens terms to simplify for you, but really you should go have a chat with your accountant.

 

Since when is Land Tax in NSW pro rated ?

 

On what do you base your answers on, especially for 1 and 2?

You should point out that you are neither qualified or licensed to give tax advice.

1. If the property is rented out there could be land tax payable. This will depend on your other holdings and timing issues, otherwise someone could rely on this and suffer a loss.

2. None needed for tax reasons.

3. Yes will always be subject to CGT based on the % of time rented out, but the CGT could be nil when other costs are taken into account.

 

yes point 2 incorrect. valuation not necessary. see first used to produce income rule. its proportionate basis as it was an IP first.

valuation only required when turning your PPOR into an IP.

 

#1: I have no other holdings for land tax. The land value is over $1m. I will own the one x land at $1m. Calc says $10k a year is payable. Current owner doesn't pay land tax. I can't see any exemption if you don't already own a property, and then you buy one but rent it out first before living in it...

When does the land tax year start? If its as at 31/12/2017, the property will be vacant, owned by the vendor and not subject to land tax. I would then settle/buy it in Jan 2018. If I then rent it out and move into it before 31/12/2018...do I not get assessed as land tax payable? Or is the dates for the tax year wrong/irrelevant?

Is there any concession/ruling that allows me to not pay landtax if I rent it out first then want to move into it quite soon after, or does this not exist?


RE: #2 and #3: Given the stamp duty cost ($70,000) etc on purchase, this will negate any potential property price rise during the 'investment property' period and mean the CGT is as good as zero?

 

Sorry I don't quite get this, who would suffer a loss? and can I use the timing issues to my advantage?

 

1. Possibly. depends on value and state and who owns it. What is their threshold ?
2. No.
3. Yes. Pro-rata. Just remember that costs of ownership that you never claim a deduction for aftre the first 6 months may even add to the costbase !!! So a profit may not occur so the 6mths period wont matter much

 

NSW, the threshold is ~500k. the current owners don't pay landtax because there is 3x owners and I believe they are therefore under the threshold. They did have it rented out but there is a land tax clearance certificate saying no land tax was payable in 2017.

 

They must be living in it

 

Current taxable value $1,000,033 - owned by 3 people, so all under threshold. It's definitely been rented out - the tenant vacated a few months ago and was there long term. Clearance certificate from land tax says none was payable in 2017.

 

Land tax would be payable in that case. Clearance certificate only shows what's owing.

Tax Tip 124: NSW Land Tax: Comparison of Joint v Single Ownership Tax Tip 124: NSW Land Tax: Comparison of Joint v Single Ownership

 

I wonder sometimes. Lets spend $1m on something we dont understand. It makes profit right ??