Owner occupied unit - convert to IP or not

Discussion in 'Accounting & Tax' started by Basil Abraham, 5th Feb, 2020.

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  1. Basil Abraham

    Basil Abraham Member

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    Hi,

    I am Bas. Owning out PPOR 2 bedder unit in Upper North shore Sydney with a loan balance of 630K. Want to get into investing, but that would only be possible in the future, by when we would have saved enough deposit/acquired equity on our PPOR.

    With two kids, it makes sense to get into a 3/4 bedder, but we are stuck to the current location due to schools and conveyance convenience. My thinking is that if I move into a 3 bedder rental unit and rent out our PPOR, there are some tax gains to be made. I am however not sure if this is possible and if so, whom to contact to get more details. Hoping to pick the brains of the great people here to get a grip of the best way forward for the coming year.
     
  2. Terry_w

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

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    Yes it can save you some money potentially. You will need to crunch the numbers to work out how much and then once you know that you can determine if the savings are enough to justify the hassle of moving.

    Your tax agent is probably the best one to get advice from
     
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  3. Basil Abraham

    Basil Abraham Member

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    Thanks Terry. I do not have a tax agent at the moment, have been filing my own tax for the past 4 years, since I moved to Australia. Is there any recommendations you can make?

    Also, to confirm my understanding, is it possible to move to a rental in the same/nearby suburb and rent out the PPOR? As mentioned earlier, the reason is to move to a bigger place.
     
  4. Terry_w

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

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    have a read of my tax tips:
    Terry's Tax Tips
    (just read the ones that relate).
    Look at the 6 year rule too.

    There are a few tax agents on the forum, have a read of their posts and make contact with one.

    You could move next door even and this could work.
     
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  5. Basil Abraham

    Basil Abraham Member

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    Thanks again Terry, will read the tips.
     
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  6. Trainee

    Trainee Well-Known Member

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    Bas my guess is you dont know how this works, and you have a lot of mistaken ideas about what you can and cannot do. Thats fine, just read terrys tips with an open mind. Dont think but so and so said you cant do that. Assume everything is possible first, then question it later after you know the full picture.
     
  7. Basil Abraham

    Basil Abraham Member

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    Thanks Trainee, you are absolutely right about me not knowing much about this. I am here to learn and also ensure that I do not end up making any more stupid decisions. I believe, buying my first PPOR in upper North shore when the market was high was not the wisest of the decision.

    I will contact one of the tax agents to work on my behalf and help expedite my learning to understand the details and then take a decision.
     
  8. geoffw

    geoffw Moderator Staff Member

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    When you get somebody to look at the tax, also get them to look at the tax implications of capital gains tax on selling.
     
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  9. Trainee

    Trainee Well-Known Member

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    Bas while selling ppor is usually exempt from cgt, there are different rules that apply if you convert to ip, and different rules apply depending on whether you buy another ppor, rent, how long this goes for, etc. Your tax advisor should explain this.
     
  10. Paul@PAS

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

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    Its possible that BOTH properties (for different dates) would be eligible at some point for CGT concessions.

    eg Current main residence is exempt for period while is was the main residence AND perhaps for 6 years afterwards. However the new residence may be exempt (or you may choose the former home) during the 6 years but also for the period after 6 years. Catch is you cant have any days where both are exempt on the same day (unless you sell the former property within 6 months of moving out.

    The impact of the present market value on the current home may also reset the costbase from its actual cost to the value on the first day it commences rent (s118-192) Any advice should always consider that issue.
     
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  11. Basil Abraham

    Basil Abraham Member

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    Thanks Paul. I am not sure if this is the right forum to say this, however, I would like to have a chat and see if we can work together on this. Are you accepting new clients at this point?
     
  12. Paul@PAS

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

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    I dont conduct and provide services on PC due to forum rules. My contact details are noted below and I'm always open to discussion
     

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