Hi All,
We are considering renting out our family home as a holiday house when were not going to be there. Currently we are living there for about 4 months of the year and feel we could rent out our place when not there. We do not have any other properties. We live on a coastal region in Victoria and holiday homes could give us a little extra finances.
We plan on selling in around 5 years time and building again, just wondering if anyone has done this before and how tax and CGT would apply.
Cheers
I would speak to a qualified tax person. Having said that I think that technically it would be apportioned based on time rented out. I am a little rusty but I believe that there is a buffer period that is allowed and that used to be 6 years. Not sure if that is cumulative or the ticker resets each time you move back in.
I would clarify that piece first as CGT would not apply if the ticker resets or you haven't breached 6 years (if that is still the buffer). There after it would be the years rented (less buffer)/ years ownership X amount of gain. Then 50% would be added to your taxable income for the tax year that it was sold.
Worth asking a tax guy and confirming the rules which have to be navigated.
Thanks AussieMark,
Still have to do my tax return so will ask the boss for some advice.
Cheers
Hi, if you have no other property you can use the 6 year rule (ie still claim it as your Principal Place of Residence). This is assuming you lived in the property from day one of buying it. If you rented it out THEN moved in you cannot use the 6 year rule.
I've never seen it done as a part renting so don't know how it would work at the end of 6 years. With a straight move out situation you can rent it for 6 years, move back in then out and havce the 6 yeas start again. As you are living there part year will it go on forever??
You of course need to declare the income but can claim expenses. eg if you use it for 4 months and rent it for 8 months you can claim 8/12ths.
A decent property accountant can confirm this.
+1 on good accountant as you will need depreciation schedules which the part of the year that it is rented would be claimed. I think it has the potential to be messy.
Not sure whether the clock resets. I think it is cumulative otherwise one could perpetuate the 6 years. Either way if you are selling with 5 years it won't matter.
Hi All,
We are considering renting out our family home as a holiday house when were not going to be there. Currently we are living there for about 4 months of the year and feel we could rent out our place when not there. We do not have any other properties. We live on a coastal region in Victoria and holiday homes could give us a little extra finances.
We plan on selling in around 5 years time and building again, just wondering if anyone has done this before and how tax and CGT would apply.
Cheers
There are a lot of things to consider
If your property is unique you may get a higher rental, if not then you may be competing with many mediocre location properties in a race to the bottom with rental and you may get riff raff.
Managing a short term property will take fair bit of your time and you need to be on top of building maintenance and cleaning.
The commercial cleaning costs are substantial and can be more than $200, if your property is not clean it will reflect in the reviews.
Do your research on the properties already on the short term market in your area.