Depreciation, house as main residence

Discussion in 'Accounting & Tax' started by miola, 31st Oct, 2017.

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  1. miola

    miola Member

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    We built a house in 2015. Now, we are moving interstate for work and rented the house out. Likely, we will never live in this house and leave it as our investment property. We are going to rent in the new city (cannot afford to buy anyway) and leave this house as our main residence. The plan is to sell the house in 6-year time, so that we can avoid capital gain tax.

    I had a thought to claim depreciation since the house is nearly new. However, I am not sure if we can claim that the house is our main residence and, at the same time, claim the depreciation from tax. Can anybody help? Thanks!
     
  2. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    If the 6 year absence rule remains available for the next 6 years AND you do sell within the 6 year period and dont change your mind etc then yes there may be no point to adjusting the CGT costbase. But this isnt about CGT the issue is about tax deductions

    The annual tax deduction for the Div 43 capital allowances for 6 years would likely be well more than the cost of a schedule (much more). You may also fall under the old rules which allow depreciation of plant+equipt too..eg carpet, appliances etc

    The two systems are independent. You can claim deductions for income tax and still have a CGT exemption.

    Call BMT, Washington Brown or Depreciator would be my suggestion.

    And make sure you get a valuation (agent opinion not a formal val) as the costbase will become market value on the date the property is first used to produce rental income.
     
    craigc, Mike A and miola like this.
  3. miola

    miola Member

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    Thank you very much @Paul@PFI.
    This is a great news that these two systems are independent and I can claim the imcome tax and still have a CGT exemption!
     
  4. Mike A

    Mike A Well-Known Member

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    Yes a great tax benefit. Gearing benefits and potentially no cgt on sale. Couldnt ask for much better.