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Rental Income from PPOR?

Discussion in 'Accounting & Tax' started by t3ck, 30th Jul, 2016.

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  1. t3ck

    t3ck New Member

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    Hi everyone, just hoping to get some good advice here.

    My situation:
    I have managed to buy a house as a PPOR 6 months ago after saving up for some years. The thing is that I have been renting with 2 of my very good mates since my uni days prior to this and when I bought this house, I have asked them to move in with me until they can find/afford their own places.

    One of them had bought a place of his own and moved out now.
    One of them is still staying with me at the moment.

    For the past 6 months, we have been sharing the utilities bills and some shared costs on the house. I don't charge them monthly rent (no contract whatsoever) but one of them just transferred a rather huge sum of money to my account because he feels bad that he is not paying rent for past 6 months.

    Now, I am just wondering if this amount of money transferred will be considered as 'rental income'? He did put 'Rent' on the transaction description to my bank account. I understand he is doing this out of good intentions but how will this affect my tax position?

    Do I need to declare that amount of rental income now?
    Is this going to affect my CGT in the future?

    Really do appreciate any sort of advice, I will be more than happy to transfer the amount of money back to him because I really do want to retain my CGT privileges as a PPOR.
     
  2. Joynz

    Joynz Well-Known Member

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    Wow, doesn't he know about the 'cash' economy?

    And how did he get your bank details anyway?
     
  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes it is rent
    Yes it will affect CGT in the future.
     
  4. Joynz

    Joynz Well-Known Member

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    What if the payment is reversed as an error?
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    There will be an evidentiary trail.

    Reversing the transaction doesn't change the fact that the property is income producing.
     
  6. t3ck

    t3ck New Member

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    We have been sharing the utilities bills so we all have each other's bank accounts details all the time.

    Yes, I suspected so too. I am just in such a difficult position now that I am not really claiming any reductions but I am forfeiting my CGT privileges. What would be my best option now? Go full on for it to be an IP or just keep it as PPOR and give my friend a good lecture about this? How many percentage of the CGT will I be losing?

    Even if I have no intentions of making it an income producing property? Can I return it and claim that it was an erroneous transaction? I suppose you are quite right, it would be difficult to explain to basically anyone once the trail is there.
     
  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    But you are charging rent so this is taxable income.

    If it was just sharing electricity bills it wouldnt be income though.