By: rjsandersontax
9/06/2008
10:17 am |
Message deleted. Reason: Breach of terms of service |
|
By: raphael_cendrillon
6/09/2007
2:39 am Yahoo! Profile:
raphael_cendrillon Did this message offend you?
Sign in to report abuse |
Reply to this message |
My accountant just informed me of the same thing. Don't forget you get depreciations as well.
Right, back to organizing this quantity surveyor's report :) |
|
By: wseeto1974
28/08/2007
1:18 pm Yahoo! Profile:
wseeto1974 Did this message offend you?
Sign in to report abuse |
Reply to this message |
Yes, you can claim the interest as a tax deduction against the rent income while the property is income producing even if you are applying the 6-year exemption.
One extra bit of consideration is whether you are a resident or non-resident for tax purposes. For residents, if you have a loss, the loss is reduced to the extent that you have any exempt income (such as income earned from overseas but not taxed in Australia).
For non-residents, I believe you can carry forward the loss. |
|
By: hayyythere
27/08/2007
11:19 pm Yahoo! Profile:
hayyythere Did this message offend you?
Sign in to report abuse |
Reply to this message |
| Did anybody end up finding out a definite answer regarding the interest on the loan being tax deductible while the house is income producing, but under the 6 year CGT exemption rule? |
|
By: bretto_2000
14/03/2007
8:11 pm Yahoo! Profile:
bretto_2000 Did this message offend you?
Sign in to report abuse |
Reply to this message |
this may be of help
http://www-gatago.com/aus/invest/30576645.html |
|
By: raphael_cendrillon
4/12/2006
6:20 pm Yahoo! Profile:
raphael_cendrillon Did this message offend you?
Sign in to report abuse |
Reply to this message |
| Indeed, time to ask my CPA :) |
|
By: the_whogg
4/12/2006
5:50 pm Yahoo! Profile:
the_whogg Did this message offend you?
Sign in to report abuse |
Reply to this message |
| Someone told me once you've used it (and made an election for tax purposes) as a primary residence that you can't claim losses (can claim deduct outgoings UP TO the rent but not beyond). Someone else told me that the 6-year exemption is a once-only deal - you can't use it an unlimited number of times. I'm not an expert but be aware that some people are contradicting some statements on this thread. |
|
By: _steve24
4/12/2006
2:21 pm Yahoo! Profile:
_steve24 Did this message offend you?
Sign in to report abuse |
Reply to this message |
| Yes, I believe you can Raphael. |
|
By: raphael_cendrillon
4/12/2006
1:16 pm Yahoo! Profile:
raphael_cendrillon Did this message offend you?
Sign in to report abuse |
Reply to this message |
Hi Steve,
Obviously I would have to pay income tax on the rental income IF I do not have negative gearing. The question is, am I allowed to claim negative gearing on a property which is my principle residence, but where I'm renting it out because I'm living overseas (see 6 year rule above). |
|
By: _steve24
4/12/2006
10:29 am Yahoo! Profile:
_steve24 Did this message offend you?
Sign in to report abuse |
Reply to this message |
| Correct. You will have to pay income tax on the rental income if you have no more negative gearing on that property. |
|
By: raphael_cendrillon
2/12/2006
6:48 am Yahoo! Profile:
raphael_cendrillon Did this message offend you?
Sign in to report abuse |
Reply to this message |
One more question, if I'm living overseas and have paid off the property, I assume I still need to pay income tax on the rental income, at the higher non-resident rate, correct?
So I'm probably better off selling the property at some time in the future, avoiding capital gains (primary residence) and shifting the money to Hong Kong or some other country that does not impose capital gains tax / tax on dividends. |
|
By: raphael_cendrillon
2/12/2006
6:46 am Yahoo! Profile:
raphael_cendrillon Did this message offend you?
Sign in to report abuse |
Reply to this message |
Thanks Steven,
This is exactly what I wanted to know. So in a way I get the best of both worlds, no capital gains tax when I sell, and negative gearing on the interest while I'm renting it out?
In this case it might indeed be worth me moving back once every 6 years to live in it. A 6 month vacation every 6 years sounds pretty good to me anyway ;)
This also has some interesting implications on investment strategy, basically it's best to own only one property and just keep upgrading rather than buying more. That way you can always have a single primary residence, avoid capital gains when you sell, and at the same time claim negative gearing against the rental income (all whilst living overseas and paying a much lower income tax rate and no sales tax, delaying HECS repayments and so forth).
Am I being overly pessimistic here or does this sound too good to be true? :) |
|
By: mlao_au
1/12/2006
4:00 pm Yahoo! Profile:
mlao_au Did this message offend you?
Sign in to report abuse |
Reply to this message |
| also I believe you have to live in it for 6 months every 6 years to deem it as primary residence. |
|
By: stevenpod
1/12/2006
12:34 pm Yahoo! Profile:
stevenpod Did this message offend you?
Sign in to report abuse |
Reply to this message |
I beg to differ Mark.
Rapael did say that he had lived in the house before going overseas. Under Australian tax law you are permitted to continue treating the house as your main residence for a period of absence of up to 6 years. This is the case when you are using the property to produce income during your absence. In fact, if you move back in and live in it again, you can get another 6 years and so on. (s118-145(2) ITAA 1997)
The main residence exemption can apply indefinitely if you are not using it to produce income. However note that you can only have one main residence at a time.
I also believe that Rapael would be entitled to claim the negative gearing interest against the rental income when completing his Australian income tax return.
Please correct me if I am wrong. |
|
By: markhollandvsnl
1/12/2006
3:27 am Yahoo! Profile:
markhollandvsnl Did this message offend you?
Sign in to report abuse |
Reply to this message |
I'm not sure where your advice is coming from.
Are you talking about the main residence exemption under Australian tax law or is there one in HK? If it's Australian, you can not get it unless you actually live in the house, which sounds like you do not. Furthermore, it only applies while you live in the house. Say for example you moved into your house after three years living away. You would still be liable for CGT for the portion held as investment when you come to sell it say 10 years later. You should get a valuation report to apportion the gain in value between when it was held as an investment property and when you had it as your primary residence.
I think it would be a stretch to convince the tax commissioner the it was your main residence, while you are out of the country and have a tenant paying rent. Or am I missing something?
As for interst payments being more than the rental. You are nobbed in not being a non resident in Australia, no deduction in Australia for your monthly losses. You should see whether this is a deduction against your income under HK law. I would guess that it would be harsh to tax you on the rental income when the interest expense is the greater. And I would guess they would not do this. But as to whether the net loss was deductible to you, you would need in country advice for this. |
|
By: raphael_cendrillon
30/11/2006
5:19 pm Yahoo! Profile:
raphael_cendrillon Did this message offend you?
Sign in to report abuse |
Reply to this message |
I bought a house last year which I lived in for some time before moving overseas. The house is now being rented out, and I have the option to keep considering this house as my 'primary residence' for up to 6 years. This way I wont have to pay capital gains tax if I sell it in the future.
For tax purposes I am counted as non-resident in Australia and pay my taxes in Hong Kong. Now here is my question, if I count my property as my primary residence to avoid CGT, can I still use negative gearing? Currently the interest payments are more than the rental income for the property, so I was thinking I shouldn't have to pay income tax (at a much higher non-resident rate!) on the rental income.
However now I'm thinking that since it's my primary residence I may not be able to do that, and may have to pay income tax on the rent. In that case it's probably better for me to count the property as an investment property since I intend to hold it for the long term anyway.
Any ideas? |
|
