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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

    Joined:
    19th Jun, 2015
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    1,107
    Location:
    Melbourne
    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.
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Sydney
    1. yes
    2. yes liable for CGT on sale, whether claim interest or not. The test is if the interest is claimable.
     
  3. MikeLivingTheDream

    MikeLivingTheDream BCOM MCOM MTAX CPA CTA Registered Tax Agent

    Joined:
    24th Jun, 2015
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    Location:
    Philippines
    May be eligible for small business CGT tax concessions so CGT might be able to be reduced to nil or negligble anyway.