Moving tax implications

Our Experts Answer:

When a taxpayer moves back into a property that has previously been rented, a deemed disposal from the tax base is triggered at market value. Where the market value of the building exceeds its book value, a depreciation recovery is triggered. This recovery is deemed to occur on the first day of the income year after the year you move back in. It is likely that a significant portion of the losses you have accumulated will be as a result of claiming depreciation on the building. Assuming a full recovery is triggered on the dwelling you move back into this recovery income will be offset against the losses being carried forward. No further deduction for expenses is available once the dwelling you intend moving into is no longer available for rent. It essentially becomes a private asset from that point on. You can still continue to claim costs associated with earning the rent from the other dwelling, costs like rates will probably need to be apportioned, perhaps using the ratio of size of the respective dwellings. If you have not split the depreciation between the two buildings an apportionment of this will also have to be made to calculate the extent of the depreciation recovery.