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Renting a room

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chinchilla | 09 Dec 2016, 02:46 PM Agree 0
Hi Guys,

Really appreciate anyone's advice regarding the following.

We recently purchased a house (first home).
We are thinking of renting a room in our house while we keep it as our primary residence (owners living with a tenant)

Just wondering whether this will attract CGT when we sell it.
As far as I know the main place of residence is exempt from CGT.
However since im renting just a room will still be the case or will the CGT be calculated based on a apportioned rate (say 15% of the floor space for the room = 15% CGT )

Also want to clarify the following

1. they say that if you held the property for 12 months you are entitled to a 50% discount on CGT. (when you sell it) .
What does the term "held" mean. Does it mean you live there for 12 months (with or without tenants). If we continue to live in that property with a tenant from day one will it still satisfy. (also does it apply for the first year ?)

2. Also people ask me to rent the whole place in the 1st year you can claim a tax deductions for the stamp duty you paid.

Is there a benefit of doing this instead of moving to the house straight away (renting the newly purchased house means i have continue renting somewhere else during that year)

I paid nearly 35000 in stamp duty. If i rent somewhere else i will have to pay at least 24000 in rent.

So basically if you save stamp duty as a tax deduction 35000
Rent earned by renting the newly purchased house 26000 (500 X 52)
Incidental costs include (23400) (rental expenses for living somewhere else)
land tax/council rates (4750)

Saving in the first year 32850

If we move in after the first year and keep it as our main residence will there be any consequences..

Thanks in advance for your valuable advice.

  • Property88 | 09 Dec 2016, 03:24 PM Agree 0
    Hi Chinchilla,

    Lots of questions here! I will answer the one I know for certain - stamp duty is NEVER allowable as a tax deduction. For investment purposes, it can be added to your cost base when you sell.

    Eg. you paid $35k stamp duty or a property that you paid $1m for.
    You sell the property in 5 years time for $1.3m
    It's an investment, so you can add $35k onto the purchase price
    So for CGT purposes your gain is $1m $35k = $1.35m
    Your profit is then reduced to $265k instead of $300k
    You receive a 50% discount on CGT for owning the asset longer than 12 months
    So you'll only pay CGT on $132,500

    This is the only way you get a tax benefit from stamp duty.
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