Hi, does anyone have knowledge on rentals and tax deductions.
Situation is we have built a new house, all setup as investment loans, for renting. It's all under my partners name, and her mother is now looking at coming to stay for about a year.
If she lives in in for a year and then is rented out afterwards, how does that affect tax write offs? Should we "rent" it to her somehow to keep everything on the books as an investment?
Anyone have any advice on how best to proceed?
Why does your mother in law need a whole house to herself? Surely she can live with you for a year.
😵
I’ve seen lots of videos on what happens when a daughter and her step mum live with you! A whole year of it sounds great!
Me too.
But at least the fireplace and chimney gets cleaned.
Alternatively the more realistic outcome is mother in law moves in, husband realises what he's in for for the next 30-40yrs, divorces and moves into the house himself.
Presumably the money to buy the house came from her in the first place.
Its the mother in law!
should we "rent" it to her somehow to keep everything on the books as an investment?
Yes you can.
answers:
Yes.
Tax accountant.
Tax accountant.
Tax accountant.
Well if you’re not renting it while the mother in law is there, then you can’t claim it. Once she moves out and you rent it out, then you can start recognising it on your tax returns
Ask your partner
PS. Her mum is never going to move out
I am not an accountant but at face value, it looks like renting to her for a small amount and claiming expenses makes the best financial decision (besides not letting her live there in the first place)
@freefall101 so let's say I buy a unit and rent it to my kids but for very small amount, say $200 vs $600-700 market. Does it mean I can claim up to $200 x 52 expenses a year? Or can I treat it as "board and lodging" and don't declare rent as income and don't claim the expenses? Is it my choice whether I'll treat it as lodging vs rent or is it ATO's?
I'd talk to an accountant about the specifics of your situation.
Id say that the ATO would take the view that market rent is 30k per year. If your only receiving 15k then you are only able to claim 50% of deductions. It would be claimable ona proportionate basis
You must declare near-Market rent in your tax return to claim rental expenses.
Should we "rent" it to her somehow to keep everything on the books as an investment
What you "rent" to her is added to your taxable income and taxed. Expenses incurred in earning this income are deductible.
You can try to "rent" to her for 0 or nominal amount and if you get audited, you will be fined, etc.
any advice on how best to proceed
Do it properly. Not worth getting audited and fined.
Check auto tax return categories for investment property to collect income and expenditure in these categories for easy completion or to pass on to tax agent to complete for you.
Im sorry if she's coming for a year shes staying forever.
Your wife has already decided and hasn't told you yet.
Your mother in law will get settled in with some new friends in the area your wife will like having her mum nearby and especially if your mother in law is getting on in years or has health issues.
At around 9 or 10 months into the 12 months thats when you will told she staying.
Sorry i mean when you will have the discussion with your wife about the mother in law staying longer.
Yeah go get an accountant.