Investment property to owner occupier

Discussion in 'Accounting & Tax' started by Jules, 4th Jun, 2019.

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  1. Jules

    Jules Active Member

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    8th Mar, 2018
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    Hi guys,
    We’ve had a Brisbane investment property for a few years. We’ve decided we want to move in and make it our permanent place of residence towards the end of the year once our tenants lease term is up.

    When we purchased the place and before we rented it out, we made some improvements including appliance update in kitchen, new flooring and a few other bits. These costs we intend to offset against the capital gain.

    My question is, would it be worth making some more improvements e.g add in an extra air con unit and landscaping whilst the tenants are in there, to add that to the capital gains deduction before we then move in? Or is there a certain cut off time to make these improvements before we move in as owner occupiers?

    Also, I’m right in thinking the capital gains tax is applied once you make the home your place of residence, not when you sell the property? And this is based on the bank evaluation before I move in.

    Any other tips or something I should be thinking about before we make the switch?

    Thanks for your help :)
     
    Jules, 4th Jun, 2019
    #1
  2. Trainee

    Trainee Well-Known Member

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    Talk to a tax professional. None of your points are grounded in tax law.

    Did you claim depreciation in the improvements when it was a ip?

    Moving in is not a capital gains event.
     
    Last edited: 4th Jun, 2019
    Trainee, 4th Jun, 2019
    #2
  3. Terry_w

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

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    adding appliances will only increase deductions briefly while tenanted.
    CGT only applies on the sale of the property.
     
    Terry_w, 4th Jun, 2019
    #3
    Ross Forrester likes this.
  4. Paul@PAS

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

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    One of the limited issues to consider IF the property has been tenanted a while is to ensure you repaint and complete general maintenance (but not capital expenditure!) after the tenants leave and BEFORE 30 June of the financial year. eg repaint inside etc

    CGT will be calculated when you sell and the final gain will be pro-rata for # days rented vs total. Valuations dont come into it at all. Remember all private costs when you live there will REDUCE the total profit subject to that %..These are referred to as third element costs. eg loan interest, rates etc....Often missed and ignored. Our CGT record tool serves this purpose to record relevant costs, dates etc
     

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    Paul@PAS, 5th Jun, 2019
    #4
    craigc likes this.