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Renting out your house

I’m a single mum on the pension and bought my home eight years ago for $135,500. It’s now worth $260,000. If I decided to rent out my house how would capital gains affect me? I have not worked in the last eight years.

You have only asked about the capital gains tax position and I’ll address that issue specifically. However, there are knock on effects of your possible decision that I’ll make you aware of as well.

Because you have lived in the house as a home owner, you could rent the place out for up to six years. Effectively you could move back in and then decide to rent it again and the six year clock would tick over. As this is a major step, please talk to an accountant who can check out your position.

I’d also talk to Centrelink and make sure you know what happens to any pension, allowance and entitlements because your income because of the rent will be rising.

It is great to draw up a ‘before and after’ financial picture of this decision to rent out your place. Make sure you find out the costs of renting out the place – agents fees, legals, repairs, etc. Tenants can complain about broken windows and leaking taps where you might simply live with it.

Also look around for books that teach you how to be a savvy landlord or property investor. For example, the smart ones use a quantity surveyor to work out what their allowable tax deductions are and this can improve your tax return. 

Need advice about your investments? Contact Switzer Financial Services for a complimentary first appointment. 

Published on: Wednesday, March 24, 2010

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