Tax Treatment on Renting out Part of Your Home

Hi OzB,

Hoping someone can help clarify this. Doing some research has led to more confusion.

If I am living at my PPoR but I decide to start renting out part (roughly 50%) of the home to produce income and I able to:

  • Claim part of the loan interest, body corporate and other fees (less rent) as a tax deduction ?
  • Claim the depreciation of a property (If built recently) using a quantity surveyor ?
  • Claim other deductions as if that half were purely an investment property?

Really appreciate your help!

Thanks

Comments

  • +6 votes

    What did your accountant say when you asked them?

    • +6 votes

      They immediately burst into tears, saying they could never live up to the advice provided by the forum section of Australia's foremost bargains website.

  •  

    This has some information around your situation. https://www.ato.gov.au/General/Property/Your-home/Renting-ou...

    You can apportion expenses based on proportion of house that is used to generate income.

  • +2 votes

    Basically yes. You'll have to declare your rental income.

    You'll also lose the CGT concession on that proportion if you later sell.

  •  

    The ATO has a community forum where you can ask generic tax questions.

    You forgot the declaring part.
    * Declare rental income.

    When you sell you property you may reduced exemptions for capital gains reduction due to using it to generate income.

    Also if I recall correctly depreciation is probably not available in your circumstance if you only started renting it out after 9th May 2017. When depreciation rules change.

    Note: I am not a tax professional so I would recommend you see a professional tax agent who is familiar this area of tax law.

  •  

    Easy answers, no, no and maybe.

    Source: Me the OzB property investment expert.

  •  

    yes but u will also pay cgt on 50%… so work out whether it is worth it.

    once you do this claim, you property is flagged and if u try to skip the cgt the tax man will come after your a$$

  • +1 vote

    Claim the depreciation of a property (If built recently) using a quantity surveyor ?

    If you do this then you need to get the house (or the rented portion of the house) valued prior to renting at at the end of the total rental period as you'll have to pay CGT on that section of the house. I got caught with this on my 2nd house.

    The only loophole you might be able to use is if you lived in it and are utilising the "I had to move out of my PPOR and have been away less than 5 (??) years" rule.

    You need a good accountant before starting on this venture.