House Extension for office effect on CGT

Discussion in 'Accounting & Tax' started by albanga, 22nd Dec, 2015.

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  1. albanga

    albanga Well-Known Member

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    Hi All,
    I have a curly one which a friend asked me.

    His wife has just started her own business from home and is doing really well, as a result they are looking to expand the home to incorporate a studio for her.

    Question 1 - If they released equity for the extension in a seperate loan split, would it be tax deductible as its "purpose" is to build an income generating room even though it forms part of their PPOR?

    Question 2 - I guess this would only apply if the answer to 1 is YES but how would this then effect CGT when sold? Surely they would be liable for a portion or else EVERYONE would be claiming a home office on their mortgage.
     
    albanga, 22nd Dec, 2015
    #1
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    1. yes
    2. yes liable for CGT on sale, whether claim interest or not. The test is if the interest is claimable.
     
    Terry_w, 22nd Dec, 2015
    #2
  3. Mike A

    Mike A Well-Known Member

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    May be eligible for small business CGT tax concessions so CGT might be able to be reduced to nil or negligble anyway.
     
    Mike A, 22nd Dec, 2015
    #3