Renting out spare room since move in as First Home buyer, Can I claim deductions?

by alloysius
(Sydney Australia)

As First Home Buyer, I have moved into the property since beginning with my sister and my other 2 friends. The propert and mortgage is only on my name. My sister and my 2 friends pay me rent fortnightly (with no bonds required). Would it be OK for me to claim deductions for tax purposes? Would I breach the First Home Grant requirement? Please kindly advise. Thanks

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Oct 20, 2015
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Can I claim deductions NEW
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Aug 21, 2015
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Oct 30, 2010
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Do it properly if engaging with the ATO
by: Ralph Cartwright

I'd echo Elizabeth's comments. I'm not a tax agent or accountant either and so I can't give advice, but I do know that if you want to claim deductions from the ATO that you need to be able to show a paper trail in the event you get an audit.

In this case, that will mean three things:
Firstly, you need to be charging your tenants the market rent for the accommodation provided. You can't charge them a peppercorn rent and expect to claim normal expenses.
Secondly, if you are going to claim interest on any loans used to create or maintain the section of the property as a rental, you'll need to make sure the money was borrowed for the purposes of investment and the monies kept separate and not dip into it for your own needs.
Finally, you should have rent-books or similar, even if no bond involved, to make sure there is an audit-able money trail.
Again, probably best to have a separate account for the rental income. Your accountant will certainly appreciate that and will make your annual tax return cheaper for you as less work for the accountant, plus keeps the tax man happier.

Oct 29, 2010
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Be careful of CGT...
by: Elizabeth Elwell-Cook

My understanding of this is that there's no problem with you renting out a room to your mates, even in your first six months in residence on the First Home Buyers' scheme.

You don't mention how long you have been living in the house.

HOWEVER, I heard a rumour in a magazine somewhere that this would have implications for CGT if you wanted to claim deductions on your tax.

As I am not a Registered Tax Agent, I am neither qualified, nor licensed (big fines) to comment further on this, but you could check out the ATO web site (www.ATO.gov.au) or check with your accountant if they are legally allowed to give you advice on this.

I'm going to pass this on to a friend who IS a registered tax agent and see what she has to say on the matter.

Stay tuned!

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