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Leasing PPOR close to end of FY

Discussion in 'Accounting & Tax' started by CargoCult, 26th Feb, 2016.

  1. CargoCult

    CargoCult Member

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    I will need to move out of my PPOR a couple of months before the end of the financial year. From that moment I will use it as an investment property.
    The property will be advertised in advance and I will keep advertising after I vacate it.

    Let's suppose I cannot find a tenant until the next financial year, meaning I would have no income from the property this financial year.

    So, if the property is vacant and advertised for rent, but I have no income, would the expenses still be tax deductible?
     
  2. BMT Tax Depreciation

    BMT Tax Depreciation Chris Business Member

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    I can only comment on one aspect of it but depreciation will be claimable regardless of occupancy.

    The property only needs to be available for income to claim depreciation, not necessarily tenanted, and even a small availability period at the end of a financial year might see you with a surprisingly large amount of deductions (through things like instant write-offs and low value pooling), depending on your history with the property.
     
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  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    If it is genuinely available for rent then generally expenses associated with it will be deductible
     
  4. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    The ATO has a integrity test in the rental schedule which requires income to be present (agent software, etax, etc). Normally rent and associated costs are claimed at Item 21 but this test can affect that in the example described. If you dont have any income you probably should use field D24 to claim deductions where the property is available to rent but not yet tenanted.

    An agent tenancy agreement and other evidence of active attempts to seek a tenant would be wise if its challenged to help demonstrate that it available for rent.

    Tip - Consider market value at time its first rented and retain on file the basis for determining that value (agent opinions ?). It may become your CGT cost base.
    Tip - Get a QS report at that time (only dont bother when the QS says so). Deductible fee in 2016 year !
    Tip - register for land tax even if you feel the threshold is far higher
     
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  5. Daniel Taborsky

    Daniel Taborsky Well-Known Member Premium Member

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    My previous PPOR became an IP and was available to rent for the last few weeks of FY15. I didn't have a tenant by 30 June (and so no income) but I managed to include it at item 21 using etax. Although I did have another IP which did have income so maybe that's why?

    Don't forget about the 6 year rule if you're not going to move straight into a new PPOR.
     
    Last edited: 26th Feb, 2016
  6. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Good to know they fixed that issue in etax

    The 6 year rule may not apply but if there is a leased home yep thats wise to consider It is sometime a matter of election but in some cases it cannot be used. eg move into another property owned by self or owned by defacto / spouse. Its not as automatic as many are led to believe on PC.

    The info on cost base is incorrect. s118-192(2) is mandatory when the property was formerly exempt as a main residence and the cost base will become the market value.
     
  7. Daniel Taborsky

    Daniel Taborsky Well-Known Member Premium Member

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    Paul's correct about the cost base. Of course, if the property ends up being fully exempt (e.g. because it is sold within the 6 year period and you elect to continue to treat it as your PPOR) then it won't be necessary to work out the cost base.
     
    Last edited: 26th Feb, 2016
  8. CargoCult

    CargoCult Member

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    I'm confused if I should obtain a valuation when I move out of my PPOR. I'm moving into a rental property and I do not own any other property. So, when is the best time to obtain a valuation?

    1. When I move out;
    2. After the 6 year period if I don't sell it and did not elect a new PPOR; or
    3. When, and if, I purchased a new PPOR?
     
  9. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Up to you. If you claim the main residence exemption you won't need it, but if you don't then you will need it.