Living in my investment property, what do I do with my LAQC?

Shelley asks:
(updated on Tuesday, January 22nd 2008)

Hi I bought a property 18 months ago as an LAQC. I rented the house to tenants for the first 12 months. However they moved out in November last year and I moved in to do some renovations to the house both inside and out. An accountant friend advised me that this was ok as the sole purpose for me living in the property was to undertake work on it. I have been living there almost 5 months and the work is almost complete. For a number of reasons I have recently decided that I would like to continue living in the house rather than rent it out to tenants. But I’m not sure what to do in regards to my LAQC status and up coming tax returns? Should I file one last company tax return for the year ending March 31st 2007? And then dissolve the LAQC? If so how do I do this? Thanks Shelley

Our Experts Answer:

With all due respect to your accountant friend, I would have to disagree and am relieved you have decided to ask for a second opinion. In order for expenses on your property to be tax deductible, the property must be available for rent. That doesn't mean you have to have someone renting the property, it just means that the property must be available to be rented. If you are living in the property or the repairs and maintenance (or renovations) you are doing to the property mean that a tenant could not rent out the property, then any revenue expenses incurred will not be tax deductible. The repairs and maintenance (or renovation) costs can be capitalised and then depreciated accordingly. In terms of now using the property as your home, I would advise that you sell the property from the LAQC to yourself at market value (as determined by a registered valuation), deal with the depreciation recovered issue within the LAQC and then depending on the status of the balance sheet, you can then prepare final accounts for the LAQC. As this will happen in the 2008 financial year, you will not be able to do this until after 31 March 2008. This situation, as it does with many others, demonstrates the need to get good advice pertinent to your situation.

Kenina Court is a director of Acorn Solutions Limited, an accounting firm dedicated to working with clients to help them create wealth. She is an avid property investor, entrepreneur and seminar presenter on asset protection and wealth strategies.



 




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