Renting out your home
I am looking to rent out my home (main residence) and move into my holiday home
Questions:
-Can I negatively gear my home?
-What records do I need to keep?
Can I negatively gear my home?
Yes, but negative gearing only occurs when the property makes a loss i.e. expenses are greater than income. If you make a profit it will be positive geared.
Expenses include - water rates, council rates, land tax, insurance, repairs, depreciation, loan interest etc
Notes-
-rental income must be at market rates - if below market rates the expenses will be limited to income received (see ATO IT 2167 para16)
-interest expense - interest is only claimable if it was "used" for an income producing purpose i.e purchase / renovate a rental property. If you draw down on your loan and use the money for a private purpose then that portion will not be tax deductible. If there is currently a loan on your home you will need to determine how much of the loan was used to by your home versus how much was used for private purposes
-repairs versus capital items. Repairs are deductible when incurred whereas capital items are depreciated over a number of years.
What records do I need to keep?
Receipts
Most rental properties have the following expenses:
-Council rates (4x instalments)
-Water rates (4x instalments)
-Insurance
-Loan interest
-Loan annual / monthy fee
-Repairs / Capital purchases
-Depreciation
Some properties also have
-Land Tax
-Body corporate fees (4x instalments)
see these links for more information
https://www.taxslayer.com.au/blog/rental-property-checklist-117s106
https://www.taxslayer.com.au/blog/rental-property-worksheet-117s159
Valuations
You will need to have your home valued when its use changes from being your main residence to a rental property. You will also need to do the same for your investment property as its use is changing to be your main residence. Note that the valuation must stipulate that it is for capital gains tax purposes - a valuation done by a local real estate will not suffice.
You will need evidence to prove that your home is in fact your main residence. As a rule of thumb you should have 7 or more pieces of evidence eg- main residence address is updated with Medicare, Vic Roads, banks, kids school, Electoral Office, telephone provider, ATO and so on