Owner occupied immediately or rent it out but cop CGT?

Hey guys,

After 12 months of searching and inspecting, I bought a duplex. Bought it at auction for 825k and the one attached next door sold in May for 860k. Both identical. I am not saying I got a bargain. I'm just paying what the market thinks its worth today.

Anyway, I've been reading the pros and cons on tax when you don't move in upon purchase and subject to CGT etc. I also know about the move in as owner occupier, live for 6 months then rent it for 6 years etc.

I read another thread about the tax implication on turning owner occupied to investment later down the track and how it's not always a good idea. The thread didn't list the implications, and I would like to know what some of these would be. To me, owner occupied then turning to investment would still be better than it being an investment from day 1. What am I missing?

Things I could claim if investment from day 1 are stamp duty upon sale, agent fees, selling fees, LMI if any. If I had 100k capital gain, all the fees will be deducted from the gain which I get upon sale. If it was owner occupied day one then rented out later, I don't need to worry about any CGT to bother about the deductions.

Thanks for any assistance here and let me know if anyone can provide provide professional service at a cost.

Also note if rented, it will be positive geared so won't be able to claim anything back on tax return.

Thanks,
William.

 

I am a bit confused.

When I buy property, I have a four step process:

1. Develop a purpose and a plan for the purchase.
2. Look for properties that match this.
3. When I find a candidate, consider the tax implications.
4. If everything looks good, purchase the property.

From the OP, it looks like your process was:

1. Look for properties.
2. Purchase a property.
3. Consider the tax implications.
4. Develop a purpose and a plan for the purchase.

Not having a go at you, I am trying to understand your process to see if I can contribute.

 

Kiernak. Jumping in here to learn too. Good points. From my mistakes, I would also like to add. Plans A what is back up plan or alternative. If Air B n B goes pear-shaped is it right for ordinary rental? If you leave the country is it a good IP B. What if the tax laws change ie land tax comes in. CGT changes etc C. I think there is a C here too maybe litigation and legal risks like when tenants try to sue you or leave the country and your property destroyed

Many have the rosy scenario but what is the back up plan if they (me) is wrong? And governments are %!##? they keep changing the laws and that can bleep you too.

 

Totally agree.

All of your points is what I term “risk analysis” and should be performed as part of my Step 1.

I should also add that no-one who performs risk analysis does it absolutely perfect. For example, how many investors included the impact a pandemic in 2020 in their property purchases. I didn’t.

Hence, risk analysis is an ongoing exercise. For example, in March this year, I stress-tested our property portfolio by running scenarios such as losing one IP’s rent, 2 x IP’s rent, ...