Granny Flat- Apportion by size or value

Thanks Mark - this link is very helpful.

 

I haven't read that ruling before, but it seems to be about apportioning capital expenses and may not apply in situations such as apportioning interest on loans used to acquire a property which has an existing granny flat as this will require apportioning the land as well.

 

The Doctors example is simple and assumes that the apportionment is to homogenous property. Thats not always simple. Its rare to find homogenous property and each case needs to consider a broad range of factors

eg Different amount of land vs m2 area, different uses (resi flat and commercial rental) and where there are common areas eg stairways, emergency escapes etc. There may also be different plant & equipment eg two different types of AC unit etc. Or one may be retained and have different tax issues.

I often encounter this with development land. The front site is road noise affected and the rear isnt. Or one may have an easement. Yet all seem approximately identical. It may be reasonable if selling all three to use 33.33%. However if the rear one had water views, jetty access and was being retained this may be far from reasonable.

 

I am in a similar situation. Looking at buying a property with an existing detached secondary dwelling. Do we apportion the owner occupier loan and investor loan based on the valuation at the initial stage. or is it best to buy property with owner occupier loan initially and then figure out the valuation etc etc after moving in? Is there any tax advantages of either method?

 

You will need to apportion interest on the loan as discussed above.

 

You will likely need expert assistance as the historical cost must be apportioned into the two relevant portions. A property valuer can assist with that. They need to advise two things:
1. Apportion cost into A + B (B = GF portion of cost incl land adjoinging exclsuively used for the GF)
2. Advise what % of the land is involved in B (as that will be used for rates)

You may also need:
3. The amount of the property that is to be insured as A + B if they are separate and the insurer needs to individually assess them. A GF attached to or within a dwelling may not require this.