Vendor-turned-Tenant

I am still renting in both scenarios.
But the difference is the mortgage repayment has started and the tenants pay the mortgage repayment.

 

So in what circumstance it make sense to organise a license agreement, and not a rental agreement?
Or get both?

 

Almost always a licence in this scenario - but the issue is whether you're even legally able to do that...

 

hhmmm… how is this so?

 

I would be delaying settlement instead.
The only concern I would have with delayed settlement is IF your circumstances change that might affect your ability to borrow.

Eg. If you're approved for $x, you will need to settle by a certain date. Past that date, you will need to get a new application through.Generally, this is not an issue, however with covid, if your job is not safe, this may cause issues.

Proceeding with settlement and allowing the vendor to become a tenant will potentially cause tax issues for you later.

 

If you're renting out a residential premises for a certain amount of time, you don't usually get to pick and choose whether residential tenancy legislation applies to you or not. You'll have to have a careful look at the legislation in your state or get legal advice.

 

I'd prefer to delay settlement as well, OR just let them know it's vacant possession, however if you do allow them to stay, this would be a concern to me

It's your property, YOU appoint the letting agent, not them. You don't want to be locked into an agent that you are not happy with, has a vested interest in keeping the tenant happy, or charges exorbitant fees for low service.

 

That's one of the considerations I have. The vendor is seeking to continue staying for a few more months, not a couple of weeks. if I the settlement day is pushed back by a few months, my loan application will need to be renewed, there is a risk if my circumstances or lending criteria change.

CGT Tax Free Status will stay. However, CGT is apportioned.

Land tax is determined on the status of the property on the 31st December each year. If it is your PPR on this night then no land tax is applicable. If it is still being rented at this time then land tax is payable.

 

When im referring to CGT Tax Free Status, im talking about the nothing being proportioned. Its ALL CGT Free (excluding the where it does become an IP later).

There's also the 6 year rule which has a requirement where the property has to be a PPR from day of acquisition (though I can no longer find that clause on the ATO site).

 

You can use the 6 year rule if rented first, but only from the time you move in and establish it as the main residence then move out again.

 

This varies from state to state - that is the case for nsw land

 

See this one

Tax Tip 233: The 6 year rule when moving into an IP and then out again Tax Tip 233: The 6 year rule when moving into an IP and then out again

 

Ah ok, so that means for the period it was rented, that part would be subject to CGT?

 

sort of, see my Tax Tip 233

 

I purchased a PPOR back in 2000 and did a handshake agreement with the agent in April that I would purchase at the full asking price (55K at the time) on July 1st when the FHOG grant was introduced. I rented it until that point so try before you buy kind of thing. Probably only a viable strategy in a down market admitiddly.

 

Paying land tax for the first time | State Revenue Office (sro.vic.gov.au)

 

What about QLD?

 

What is land tax? | Environment, land and water | Queensland Government (www.qld.gov.au)