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May 2, 2022

Tax Implications of Living In Your Investment Property

After a turbulent few years in the property market thanks to COVID-19 related downs then ups, there’s been some shifts in the way people have structured and used their homes and investment properties.

In fact, it’s gone both ways – for some, their changing fortune has led them to consider converting their homes into investment properties, moving elsewhere, and paying rent. On the flip side, many investors who were hit hard by some of the tougher times converted rental properties into their main place of residence to save money and protect themselves from future crises.

What are the tax implications for these people? Well, if this is you, what follows is designed to give you an overview of what to expect before speaking to us for the specifics.

Can I live in my investment property?

Yes, of course you can, but there are some considerations.As a start, ensure you keep clear and well documented records of move-in date so you can inform the ATO as part of your end of year tax return.

We’d also suggest obtaining a valuation of the property at the time you move in, if there are or have been variations in the value of your property this will help mitigate more hefty tax implications.

 

What does it mean for Capital Gains Tax (CGT)?

It can be possible to claim CGT exemptions for the period you’re living in your investment property, but your ability to do so depends on a raft of factors starting with how long you’re using the property as your main residence. Don’t dive into the process without understanding what your CGT situation is completely – we can help with this.

 

Considering renting out part of your property?

If your property is setup in a way that allows you to rent a room or suite there’s a chance you can claim some tax deductions. The claimable amount is dependent on how much floor space (by square metre) you rent out in proportion to the rest of the property you’re claiming as personal use.

 

Do the same rules apply for Airbnb temporary rentals?

Pretty much. There are differences to what you’d be eligible to claim or pay in tax if you’re temporarily renting out all or part of your main residence, but the concepts remain similar –floor space rented, period of rental, income from the rental are all factors.

 

It’s well worth getting specific advice for your scenario

What you see here is just the tip of the iceberg, designed to help you understand that there’s complexity and many variables involved with moving into an investment property. That’s why we suggest speaking to a tax professional first. Tax implications could be harsher than you might expect and it’s worth assessing the outcome with a clear strategy regardless of why or how long you plan to stay in your investment property.

If you’re looking at changing the status of your investment property or indeed renting some or all of your main residence, speak with theAttune team today on 1300 866 113 or send us an email for sound, strategic advice that could save you major headaches (and money) later.

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