Renting to kids

Morning all. Is it possible for me to negatively gear a property rented to my daughter.

 

Parents can contract with their children
Yes. Assuming she is over 18

 

Just make sure you are charging your daughter market rent i.e. don't give her a huge rental discount to increase your loss on the property.

 

Even possibly if shes under 18 too, for tenancies.

 

She will be 17 and I will be paying her a college fund that she will use for her expenses and pay me rent out of that fund. Am I pushing my friendship with the tax office?

 

as long as she is genuinely renting it and paying the rent with her own money you would probably be fine.

 

But is it considered her “own money” if it is being siphoned through a “college fund” apparently designed to pay her rent and living expenses?

It appears the decision as to how she spends her “college fund” is stipulated. The money simply goes from dad back to dad?

Interesting....
Marg

 

good point Marg

If the property is running at a loss it could be seen as a scheme to gain a tax deduction for an otherwise private expense/

 

She will be paying rent to someone out of her college fund. She will also have some of her own money from a part time job. Hopefully. I just want her paying rent to me if possible?

 

That was the impression I got from the information given.
I may be wrong.
Marg

 

You can, but I would get a rental appraisal (with comparable rental properties) and have a rental agreement- it really should be at arms length. Have to ensure that it doesn't raise red flags with ATO.

 

I don’t think the amount paid is the issue.
The problem is whether it is seen by the ATO as tax avoidance, regardless of the “rent” paid.
Marg

 

Yes, it sounds a bit dodgy.

 

Sorry to jump into the conversation, but I don't understand why you need to rent out to your kid to be negative geared? I thought if you don't have rental income from anyone, your IP will running at a bigger lost?!

 

Only expenses related to the production of income could be deductible. If it is deliberately kept untenanted no expenses could be claimed.

 

Thanks Terry.

So in the even that IP vacant between rents, ie. as short as couple months then loan interest for these months could not be claimed as expenses? I was thinking the process calculating gain or lost for taxing purpose of a rental property is for the whole year

 

If you are actively looking for tenants you could claim the expenses while it is empty.

 

@UglyDuck Why would you want to deliberately lose any income?

 

Not me! But seems the OP will give money and collecting rent to/from kid at the same time, while trying to maintain negatively gear.

 

I understood that he or she was doing the preliminary research as to where they would stand legally and financially when their daughter leaves school and commences her studies. Is there any benefit or detriment to them if she rents the IP?

When our kids were in high school I considered buying a unit near the university for them to use later. There are issues with an IP while supporting teenage/youth dependants who were also full time students. It is a financial juggle with NG, tax, children's residential and employment status - all sorts of laws come into play that you wouldn't usually know about unless you are in that situation.

Compare the posts last month about renting a gf or part of my house to our adult kids when we retire.

Granny flat in PPOR backyard family living in house