New member in WA - what would you do with a spare $100K ?

I’m 29 years old, single, with an annual income of approx. ~$110,000.

I sold my PPOR house earlier this year and have approx. $100,000 savings.

I live in WA so I’m eligible for its $20,000 ‘Building Bonus’ grant (for building a house) and the federal $25,000 ‘Home Builder’ grant (for building or renovating a house).

My long-term goal is to have passive income through investments, including through property, and to take advantage of property tax deductions.

I know that the federal grant is limited to owner-occupiers and that the state grant is available for both owner-occupiers or investment.

I have two ideas:

1) Build a house (and receive both federal and state grants), live in it for a short period (due to PPOR eligibility for the federal grant), refinance/switch to interest-only investment loan, lease the house. Perhaps still make use of the PPOR CGT exemption if moving back to it within 6 years?

2) Buy an established house, renovate it (not necessarily more than $150,000 for the federal grant), so I would be ineligible for both federal and state grants, lease the house long-term, refinance after renovation and use the (hopefully) increased equity.

I would be very interested and grateful to hear anyone’s thoughts on these ideas. What I’m particularly interested in is whether I’m understanding the tax implications correctly:
- Building a new house means that its cost can be depreciated over 40 years?
- Buying an existing house (which may already be quite old nearing to 40 years) means that only the renovation costs can be depreciated over 40 years?
- Renovation costs can be claimed over 40 years if the owner has an ‘intention to lease’ before starting the renovation - does anyone have any experience/warnings about this?
- Other non-capital deductions can be claimed each year only if the house is leased or ‘available to lease’ - does anyone have any experience/warnings about this?

Thanks everyone!

 

I would probably buy an established house. And largely ignore the government grants or tax implications.

I would consider them at most, some sweeteners on top, and otherwise mostly irrelevant to the very important issue of focusing on property strategy and selection.

Welcome to the forms btw! There's quite a good number of WA contributors to these forums.

 

Grant money is great, but I'd focus on a solid investment first THEN consider tax deductions / incentives.

A few bit of general advice:

• A PPOR is one of the last 'tax free' assets - there is no CGT tax on gains from your own home;
• Spend less than you earn, and use the surplus savings to 'drive capital growth' through being an active property investor (renovations / subdivision etc).
• Many young investors are income rich asset poor. It's best to be focusing on growth assets to build an asset base.
• Take a 10-15 year view on your investments, then work back to 5 years, then work back to 12 months. It's easy to get caught up in short term 'free money' i.e. the Building Grant and overlooking your long term plan.

Best of luck