I own my own home outright and want to upgrade to a new home and rent my old home. But I am concerned about the effect of re-financing my old home. Will I be able to claim the interest as tax deductible?
Hey Murray, A really common question. Unfortunately the ATO has very strict tracing rules. When looking at dedcutibility of interest it is 'the use to which the funds are put' that counts. If you re-finance your old home and use the funds to buy your new home - the interest will not be tax deductible. In fact, I have completed analysis for many clients in your situation and the majority of the time the calculations clearly show that you shouls actually sell your old home, buy the new home with the capital an dthe re-finance the new home to commence a property portfolio - the Right Way, Right from the start. WFS Canberra can help you more with this if you need.
Hey Catherine, I own my own home but my brother and sister want to move in with me and pay rent(they are much younger and want to try living in a bigger city). Would I need to declare this income? and conversely claim the expenses for my home? Thanks, Mat
Hi Mat, The ATO has two standards on this issue. You can declare the income and claim the expenses. Or you can not declare the income and not declare the expenses. Your choice. If you like paperwork, then keep a record of all income and expenses and then decide at year end whether it is worth claiming it. Obviously, if you make a profit you probably wont declare it but if you make a loss you may decide to claim it. If you couldn't be bothered with the paperwork then don't bother and don't declare it. The ATO is lax on this because in most cases like this the income and expenses are pretty equal.
Hi
ReplyDeleteI own my own home outright and want to upgrade to a new home and rent my old home. But I am concerned about the effect of re-financing my old home. Will I be able to claim the interest as tax deductible?
Murray.
Hey Murray, A really common question. Unfortunately the ATO has very strict tracing rules. When looking at dedcutibility of interest it is 'the use to which the funds are put' that counts. If you re-finance your old home and use the funds to buy your new home - the interest will not be tax deductible. In fact, I have completed analysis for many clients in your situation and the majority of the time the calculations clearly show that you shouls actually sell your old home, buy the new home with the capital an dthe re-finance the new home to commence a property portfolio - the Right Way, Right from the start. WFS Canberra can help you more with this if you need.
ReplyDeleteHey Catherine,
ReplyDeleteI own my own home but my brother and sister want to move in with me and pay rent(they are much younger and want to try living in a bigger city). Would I need to declare this income? and conversely claim the expenses for my home?
Thanks,
Mat
Hi Mat, The ATO has two standards on this issue. You can declare the income and claim the expenses. Or you can not declare the income and not declare the expenses. Your choice. If you like paperwork, then keep a record of all income and expenses and then decide at year end whether it is worth claiming it. Obviously, if you make a profit you probably wont declare it but if you make a loss you may decide to claim it. If you couldn't be bothered with the paperwork then don't bother and don't declare it. The ATO is lax on this because in most cases like this the income and expenses are pretty equal.
ReplyDelete