Converting PPOR to rental, tax benefits?

[dynamite]

Hello all

as some know, Im converting a PPOR into a rental.

I will be seeing an accountant next week.

In the meantime, does anyone know of any benefits I should be aware of, any tips, or suggestions. Not just about tax, but finance, stamp duty etc.

My mate told me Im entitled to 50% less stamp duty, but not sure about that.

Any tips would be appreciated.

 

[Aceyducey]

Why are you paying stamp duty? It only applies if you buy the property. Or did you defer it when you did buy?

Cheers,

Aceyducey

 

[Les]

G'day Dyna,

Your location doesn't say Brisbane, but I think I recall (from previous posts) that this is your location - please update your Profile to include location - it does help, significantly.

My mate told me Im entitled to 50% less stamp duty, but not sure about that

I think your mate has it bass ackward If buying a PPOR in Qld, Stamp Duty is approx half the cost of buying an IP. If going from PPOR to IP (within less than 12 months of purchase) you will need to pay the extra amount (since PPOR is becoming an IP) to OSR. But, if you have already owned the PPOR for greater than 12 months, then you might be OK.

Note, I'm NOT a "full bottle" on this - but I think this is the way it works. I'm with you, rather than "your mate".

Regarding "other tips", I hope you've been using an Offset account to prevent paying down your PPOR mortgage. An offset minimises Interest, but prevents ACTUAL paying down of the principal. This leaves the MAXIMUM loan against your IP (better Tax Deductions).

Stamp Duty shouldn't be involved (unless you are changing the ownership of the property)

Regards,

 

[dynamite]

Gdday Les

Yep in Bris.

I am going with interest only on the IP, are you saying I should try and get as much of the equity in the IP moved to my PPOR?

Can I claim any of the maintenance I am currently doing on the house so it is rentable (good english)? For example I am re carpeting because the old carpet has worn all the way through. Can I claim this even though I have done it before it has become tenanted?

 

[Les]

G'day Dyna,

And thanks for updating your profile

Can I claim any of the maintenance I am currently doing on the house so it is rentable (good english)? For example I am re carpeting because the old carpet has worn all the way through. Can I claim this even though I have done it before it has become tenanted?

Right about now, you should be considering getting a QS into the place. For sure, the new carpet will become fully depreciable from Day 1 of being a rental. There may even be "some" residual value in the old carpet, so get your QS in before throwing out the old carpet.... Any residual is immediately deductible in full since you're replacing it (but check this too - I could be wrong.. )

I am going with interest only on the IP, are you saying I should try and get as much of the equity in the IP moved to my PPOR?

Was this ALWAYS IO? Or are you re-financing to IO? Note, I agree with going IO on the IP - but just wonder whether you're introducing extra expense by refinancing...

It is a benefit to you to minimise non-deductible debt, and maximise deductible debt. But you'd need to run this one by your Acct. to be sure what is acceptable, and what is not.
In short, YES - but just ensure whatever you do is legally acceptable (enter your Acct from stage left... )

 

[dynamite]

I am converting to IO on the IP.

But I have been told by my financer there will be no charges associated with this.

One thing I find strange that he has done. He has consolidated $20k of debt into my PPOR, not into my IP. This means Im paying higher interest on the IP and not actually utilising my equity?

 

[Les]

G'day Dyna,

He has consolidated $20k of debt into my PPOR, not into my IP.

Could that be because the $20k of debt is personal debt? In that case, he's done it right... Personal debt is non-deductible, a la PPOR debt.

This means Im paying higher interest on the IP and not actually utilising my equity

Dyna, I'm not understanding this comment at all. WHY would this make any difference to your interest rate on your IP? What am I missing? Re "utilising your equity", I think your ARE utilising it - viz. if this was (say) credit card debt, or car loan, and you now have it against your PPOR, I'd say you ARE utilising your equity. If you didn't have equity in the PPOR, there's no way this loan would have been approved.... Am I missing something here too??

Regards,

 

[dynamite]

No I think you have it right Les

Im just spinning with all the organising I have on at the mo, Im still renovating, quickly so the valuer comes in good, and trying to get my tax benz right.

Do I need a quantity surveyor for a tax valuation or will the bank valuation do? (not that a bank valuation ever seems to benefit the owner)