Splitting decision

Question from Daniel updated on 17th June 2013:

I have recently purchased a four-bedroom home that is begging to be split into two units of two bedrooms each.  I want to live in one half and rent out the other half (either a tenant or border). Can you please advise me of my TAX/LTC obligations? I do not own any other property.

Our expert Mark Withers responded:

The costs associated with the property are only deductible to the extent that the property is deriving rental income. If you split it in half and rent half out then half of the costs, rates, insurance, interst etc will be deductible. The costs associated with reconfiguring the building will not be deductible as they are capital alterations to the structural building asset.

Mark Withers and his team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.

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