I've been monitoring the property market recently as a First Home Buyer and potential property investor. Currently living in NSW.
I want to make use of all benefits provided to me when making the jump into the property market and avoiding stamp duty costs is a good start.
If I were to go down the route of a buying a dual income property (two dwellings, under one land title), will I be eligible for the Stamp Duty exemption if I live in one dwelling and rent out the other?
Whilst for income tax purposes, having 2 dwellings (with one being income producing and the other being PPOR) can cause issues, for pretty much anything else regulatory bodies look at the place as the single residence.
To be eligible for the stamp duty benefit, you would need to purchase the house and live in it for 6 months within the first 12 months of ownership.
There isn't any mention about income generated from the property affecting your eligibility, so I'd say you'd be able to claim the benefit and be able to rent out part of the property, as long as the main house also is your PPOR for a continuous 6 months. On this front I'd say you'd be fine, although DYOR.
In saying that, you've mentioned that you'd like to be a potential property investor. If you look to buy a place purely as an investment and not a long-term PPOR, then renting out part of it during the 6 months, will cause issues if you aim to use the 'Main residence exemption' for the following 6 years.
For the Main residence eligibility, you would need to show that the house was your PPOR for 6 months, which would then allow you to apply the main residence exemption on that property for 6 years (provided that you don't buy and live in another place in that timeframe - I.e. think about rent-vesting).
If you were to rent out the other dwelling, the second dwelling will be considered an income-producing part of the residence and not be counted as part of your PPOR and thus be exposed to CGT over the entire 6 year period. The method to determine this is based on the ratio of the second dwelling's floor space to primary house (i.e. if granny is 50sqm and house is 200sqm, then CGT would apply on 20% of gains (50/(200+50)). I've used a simple example, but doing this could eat quite a bit of what could otherwise be tax-free gains.
To potentially avoid this (whilst I'm an accountant, I'm no expert so please seek advise from someone with experience in this field), you could buy the place and live in it for 6 months (without renting out the 2nd dwelling, and thus treating both buildings as your primary place of residence) and later give the entire place up for rent as one property. You could then allow the tenant to sub-let the second dwelling (or have the REA do it on their behalf) but have a single rental contract on your end. This would help show the entire house as one residence in the eye of the ATO and allow the CGT exemption apply on both properties.
In saying all that I'm doing my own research on this atm for my own situation (building a granny on existing PPOR and then renting both out), but it seems to be a feasible and legal option (just looking at the smaller technicalities to make sure all is good before going ahead)
Thank you for explaining. I'll look further into this.
I'm guessing not, but who knows. Call up the gov and ask!