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Tax Implications in renting out current PPOR and buying a new home

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sstabios | 16 Oct 2013, 01:05 PM Agree 1
My wife and I are thinking of renting out our current PPOR and buy another property to live in as the family is growing. The median rent in our area is currently around $310 per week. We only owe $236,000 from the bank. What tax concessions can we claim when we convert our home to rental? Is it better to just sell rather than rent it out? If we want to sell the rental property, how many years we need to wait to minimise CGT?

  • Eos Property | 18 Oct 2013, 11:26 PM Agree 0
    All expenses associated with your existing home will be deductible along with some depreciation.

    At the same time you will need to declare the rental income.

    Be aware if you upstamp your loan to buy your new home this part of the loan will not be deductible.

    CGT is normally applied for the increased value while the property was a rental property. Any gain in value made while the property was your home is not taxable. There are a couple of minor tweaks you can make - but the essence of what I have explained covers most instances.
  • Daniel | 04 Jan 2014, 06:55 AM Agree 0
    I'm considering the same as above. There are a few minor maintenance issues I'd be keen to resolve with our current PPR prior to renting it out. At what stage can we get the work done and still have it tax deductable?
  • Graham | 05 Sep 2014, 10:01 AM Agree 0
    I too am interested in this query - anyone?
  • Adam Sweeny | 02 Oct 2014, 09:45 AM Agree 0
    Daniel / Graham

    First off, while your property is your PPOR nothing is tax deductable. However, if you carry out maintenance prior to renting you should be boosting your property value. Then make sure you get your property revalued prior to renting to calculate your new cost base. This is CRITICAL. This will reduce your CGT should you sell down the track.

    Once rented out, you can claim any repairs you make as deductions, however deductions reduce your property cost base, which means more CGT if you sell. Exactly the same for any depreciation claimed.

    The ATO produced a video a few months ago which goes through an example:

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