claiming FHOG on property bought with investment loan

Hi all
I have a question about claiming the FHOG and HomeBuilder on a new property that we are purchasing using an investment loan.
The property is interstate (in Perth) and so we need to get an investment loan so that the bank knows we can service the loan (as far as they are concerned it is solely to be rented out).
My wife and I are planning on renting it out for the first 6 months after completion, then moving into it for 6 months and applying for the FHOG and HomeBuilder grant.
As we meet all the eligibility requirements for the grants, the only hurdle I can see is that the loan is for investment purposes, not owner occupier purposes - even though we are going to move into it and meet the residence requirements. To clarify, we will not apply for the grants at the time of getting the loan. We will only apply for the grants down the track, after everything is settled and we are going to live in it. Does anyone have any guidance on this?
Many thanks

 

Can FHOG and homebuilder grants be applied for on a property you've already settled on and rented out?

 

Not an accountant BUT if you don't move into it first then it won't be CGT free and not considered a PPOR - only exemption would be when you are buying something with an existing tenant and you have to wait for them to move out.

 

Yes its possible, but many issues,

 

From HomeBuilder government website: For example, you can rent the home out before moving in and keep the grant.

So I believe yes

 

Interesting.
But maybe if we move into it first, or just pay the mortgage ourselves for the first few months, then move into it, it will be classed as a PPOR?

 

Do you mean it’s possible to claim the grants but there will be tax implications in the future as Westminster alluded to?

 

How the bank has labelled the loan has nothing to do with eligibility for pretty much anything (FHOG, grants, deductibility, etc).

I can see so many problems with trying to do this though.

 

It could be the PPOR, but for CGT the main residence exemption can never apply in full - but if you hold it long enough that may not be an issue as the CGT could be nil

 

Yes,

 

Hi Terry,
Thanks for lending your expertise.
One more q - If we move into it immediately after settlement and live in it for 6 months and make it our PPOR, will this resolve the CGT and main residence issues?

 

Great, thanks Peter. Do you mean problems with servicing the loan, finding a new job interstate etc?

 

yes potentially exempt.

 

No issues there (which is probably why you're using an investment loan to secure the property). I'm sure you've accounted for the costs and shortfalls whilst you're moving and transitioning from one job to another.

There could be plenty of tax issues as already outlined. It may be difficult to qualify for the grants retropsetively (it's been a long time since I did a FHOG application in WA).

 

But it might impact your depreciation deductions going forward, which might be significant if it's new?

 

Ahh good point. I will have to seek advice on this. I guess you can’t have your cake and eat it! Haha. But thank you for pointing this out, I hadn’t thought of it.

 

Thanks Terry!

Thanks Peter. We will have to weigh up the tax issues and see what is the best thing for our situation - as it may not be our PPOR for long, we are planning on buying another property afterward, so it may be best to leave it as an investment anyway.
With regards to qualifying for the grants retrospectively, I will seek further advice from the OSR on this. From all I have read on the government website, we only need to apply for the FHOG within 12 months of completion of the build. HomeBuilder we need to apply before 31 Dec but have until April 2023 to provide the supporting documentation. Homebuilder also says on the website that we can rent it out beforehand we move in and still be eligible for the grant.

Either way, this is going to be an interesting exercise!