"Little known tax strategy"

in layman's terms you are saying it's not a good idea / is it illegal? :s

 

Certainly not. I suggest the strategy you outlined a few posts ago is a good strategy and worth considering.

 

On a related topic. Say you live in a house for 1 year then move out and rent it out as your IP for LONGER than 6 years.

When it comes to sell, can you claim the Capital Gains over the first 7 years as tax-exempt? (On the assumption that it was still your PPOR for up to 6 years after you move out)

 

Tax Tip 109: CGT and Being absent from the main residence for more than 6 years

 

Some of the factors the ATO will look at when determining whether you are in a defacto relationship under para (b) are:

(a) the duration of the relationship;
(b) the nature and extent of their common residence;
(c) whether a sexual relationship exists;
(d) the degree of financial dependence or interdependence, and any arrangements for financial support, between them;
(e) the ownership, use and acquisition of their property;
(f) the degree of mutual commitment to a shared life;
(g) the care and support of children;
(h) the reputation and public aspects of the relationship.​

 

Paul, could you explain what you mean by this? What would be an example where the Commisssioner would want to reduce/exclude income under Part IVA?

 

Lets say a taxpayer deliberately overstates income. I have seen a tax benefit from doing this. Its very rare but can happen. Think super deductions and gifts. Both these deductions have a capped issue which prevents a loss.

Often becomes a issue when a later amended NOA occurs

 

Are you talking about bringing income forward to an earlier income year? I can see how this could create a tax benefit but Part IVA could apply to the subsequent year(s) were income is understated.

 

Nice. Thanks Terry

 

So a buyer buys and moves into a PPOR with the the full intention of turning it into an IP in 3 months. They get a slightly better mortgage rate and reduced council costs because it's a PPOR.

How easy can it be with the bank, ATO etc to convert it into an IP? Could the bank increase their rate due to the quick change in the purpose of the mortgage? Would all usual investor benefits such as NG, depreciation etc begin once it becomes an IP?

 

The purpose of the loan (not mortgage) is to acquire the property. If that property is later rented the interest would be deductible - doesn't matter what the loan with the bank says (owner occ/investment).

Banks would increase the rate if they found out.

All the usual expenses are deductible.

Note that if you are doing this just to get a tax deduction - you should seek specific tax advice.

 

In my experience they aren't really interested once the loan is settled. I had a ppor I turned to ip and when I applied for another loan for a separate ip I declared the rental income on the original property for serviceability and no one noticed that I was paying interest as a ppor. Both loans are with the same bank and different interest rates due to one being ppor still.

 

Hi
I currently have a PROP where I wish to rent part of the house out. Will I still be qualified for the CGT exemption, or does CGT somehow has to be apportioned out because I am renting part of the house?
Thanks

 

Tax Tip 135: The 6 year rule and renting part of your property out

 

Thanks! All clear now.