Buying a property - PPOR v IP

Discussion in 'Accounting & Tax' started by robbie_p, 25th May, 2020.

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  1. robbie_p

    robbie_p Well-Known Member

    Joined:
    22nd Jun, 2015
    Posts:
    689
    Location:
    Brisbane
    Hi All,

    Over the next 6-12 months I am looking at purchasing a property in Queensland for about $500k…

    We are only looking at moving into the property in 2.5 years. We could move sooner if we REALLY had to, but prefer not to.


    Estimated details of the property..

    Purchase price: $500k
    Loan Amount: $425k
    Interest (3.3%): $15k
    Other costs: $7k
    Rental potential: about $22k

    The stamp duty for the property is about $10k if it were a PPOR and about $17k if it were an IP.

    I guess my question is would it make sense (financial) to move straight into the property and save $7k on stamp duty OR would there be some sort of benefit keeping it as an IP for 2 years (considering it is a cash flow neutral)?

    Thanks in advance.

    Cheers,
    Robbie
     
  2. Mike A

    Mike A Accountant Business Member

    Joined:
    24th Jun, 2015
    Posts:
    2,252
    Location:
    MELBOURNE
    Might be negative once you factor in any depreciation benefits.

    The biggest drawback is that it will be subject to proportionate capital gains tax on sale.

    This will reduce over time and also be reduces by any third element costs but something to consider.

    The stamp duty savings might outweigh the gearing after depreciation is factored in.
     
  3. robbie_p

    robbie_p Well-Known Member

    Joined:
    22nd Jun, 2015
    Posts:
    689
    Location:
    Brisbane
    Thanks for the info, much appreciated.

    I am not planning to sell the property and its a long term hold.

    I may look to build a granny flat on the property, so the purpose of this property is for the cash flow.
     
  4. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
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    Location:
    Sydney
    Proportionate CGT will be a factor foreveer which means you really should maintain records of all non-deductible costs of improvements and ownership (while you live there) as these 3rd element costs could wipe out any future gain (but cant in themselves create a tax loss). One downside (and upside) to a property that doesnt commence being your home from day one can be :
    - No backdated CGT dates if you have a new build constructed (bad)
    - No s118-192 costbase reset can later occur (often good especilly if you move in soon aftre acquiring eg within say 2-3 years)

    Agree a new buld in QLD should have great QS deductions UNTIL you move in and then the Div 40 would be lost forever since the assets are then considered "used". So if you do move in and its only for a short period weight up the lost value of this vs say access to the ammain residence exemption and absence concession (ie 6 year rule). Other costs you could lose by moving in is the future apportioned borrowing expenses from the day you move in.