- December 17, 2023
- Posted by: legaleseblogger
- Category: Related News
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AI Legalese Decoder Can Help Ease Your Concerns
Introduction
As a newly minted homeowner, I find myself in a unique situation that I didn’t anticipate when I purchased a house for my mother to live in. In an effort to alleviate her financial stress from exorbitant rent prices, I allowed her to pay me a reduced rent compared to what she was previously paying.
Financial Strain
My mother, who has been a life-long renter, has been struggling to keep up with the skyrocketing rental prices over the last few years. This prompted me to purchase a house for her, without considering the potential legal implications of our private agreement.
Private Agreement
Given that this arrangement was made on a whim and in good faith, I am now left wondering about the formalities involved in this private agreement. I am particularly interested in understanding how this arrangement could affect me in the long run and whether there are others who have made similar sacrifices for their loved ones.
AI Legalese Decoder’s Solution
AI Legalese Decoder can help by providing legal insight into the implications of entering into a private rental agreement with a family member. This AI-powered tool can guide you through the legal aspects of such an arrangement, ensuring that you are well-informed and equipped to handle any potential challenges that may arise.
Conclusion
With the help of AI Legalese Decoder, you can gain a clearer understanding of the legal implications of your private rental agreement, helping you navigate this situation with confidence and peace of mind. Don’t let legal uncertainties overshadow this generous gesture – let AI Legalese Decoder guide you through the complexities of this arrangement.
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AI Legalese Decoder: Simplifying Legal Jargon
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****** just grabbed a
GÔÇÖday OP,
We did the exact same thing for my in-laws. They had a potentially unstable housing future and my FIL wanted to retire. So we bought them a house they wouldnÔÇÖt get kicked out of and that they could afford to rent from us. I spoke to my accountant a few times and here are a few pointers
-ItÔÇÖs negatively gearable just like any other house. Although if you are charging under market rent you have to adjust your numbers accordingly.
You can charge 10% less than market because youÔÇÖre self managing. More than that and you canÔÇÖt claim a full loss.
-We used a standard rent agreement from the state tenancy board. You can download the form their website. They will hold the bond for you too. It will also help your mum if she is entitled to any social security provided rent assistance.
-If you have siblings just be careful to ensure theyÔÇÖre aware itÔÇÖs still your property. One day your mum wonÔÇÖt need that property anymore, and it might have gained a bit of capital growth. That is your money, not your motherÔÇÖs. May sound weird but my accountant had seen it go south before.
From personal experience itÔÇÖs been fine. Ours is pretty much neutrally geared. WeÔÇÖve fixed what is broken when itÔÇÖs needed (like any good landlord should). WeÔÇÖve had quite a bit of capital growth since we bought it. One day weÔÇÖll probably demolish, sub divide and put them in a new unit on the old block.
Not many people can say they brought their mum a house
my props to you
If the rent is not the market price for that property then you cannot claim a tax loss…you can only claim enough to make it zero profit . If you can show that it is the market rate then go ahead and claim a loss to offset against other income.
YouÔÇÖre an Angel doing this for your Mum 🙂
If you are losing on the investment, then you might be limited to deductions of the value of rent received as the transaction is with your mother.
Check ATO.
Your normally claim interest paid and not mortgage payments
Good on youÔØñ´©Å
You have basically bought a house for your mum. Lovely thing to do.
If you are concerned about anything to do with the rent? Just get her to pay $400 and give her the $100 back in cash.
I seriously doubt the ATO is going to bother investigating
You’re getting a lot of people whining about the ATO and market price for rents. There’s a lot of scale in this – in every suburb there will be people paying low rents from long term agreements where the rent has not been indexed and people paying a lot of rent because of a lack of bargaining power. I would not consider a $300/$400 difference enough to flag the ATO’s attention. I rented my sister a place for 15 years at a lowish rate – never any issues.
We did this for my parents. You will need a rental agreement in place if you are planning to negative gear. My parents never had a rent rise in 10 years
When she is eligible for the aged pension, she will also be eligible for a rent assistance supplement.
No idea what, if any, rent assistance is available now if she is on a low income.
Worth checking if you or she havenÔÇÖt checked yet.
Congratulations.
5 seconds on Google and found Tax ruling 2167 – read the section on letting to relatives. Better still, get advice from a good CPA. You could also submit a private ruling to the ATO.
“and as a working rule, income tax deductions for losses and outgoings incurred in connection with the rented property may be allowed up to the amount of rent received” -> under section as above.
You get to have capital gains and only pay $180 a week on the mortgage while helping out your mother in what you already have described as an insane rental market. Just be thankful your in a position where she doesn’t have to move in with you to make ends meet.
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My sister basically did this for my mother. Whilst it is technically an investment it also isnÔÇÖt. Everything is in my sisterÔÇÖs name and as mum pays under market rent the trade off is that my sister will receive everything from mumÔÇÖs estate when she passes bar a few sentimental items.
There are tax and other implications and IÔÇÖd recommend you get some professional advice.
My Dad did this for my grandma. Aside from the tax/ financial perspective he had an iron clad will drawn up so that the property was gifted directly to my sister and I so my lousy uncle didnÔÇÖt try to get his paws on it.
So I would consider this aspect also. You donÔÇÖt want someone trying to contest it – even though you will likely prevail in the end- itÔÇÖll cost a bomb in legal fees. And the hassle and time!
Yes I have! Certinally see an accountant and keep all receipts.
As long as it is an armÔÇÖs length agreement, with lease in place, etc, treat it like a normal investment property.
SheÔÇÖs still paying you market rent. Based on your post, youÔÇÖre not charging her $300 a week for a mansion but for a small house.
Well done mate, impossible to put a dollar value on the good feeling this generates.. Good on you & hopefully the suggestions here help you out.
Nice try tax man – getting all the redditors to confess their dodgey taxation arrangements 😛
Read this. And the ruling.
https://community.ato.gov.au/s/question/a0J9s000000NiyB/p00194486
See an accountant
You won’t be able to claim any of the losses as a deduction if the property isn’t rented at full market price.
$300 is a reasonable amount for a small place. It is not necessary to tell ago who is renting the property from you
I did this for family. I typed up a letter, basically
I blahblah am renting the property at XX Street St to this person. Rent is $$$ per month payable prior to the end of each month. Tenants are responsible for water, gas, electric etc bills. Did this at a loss for over a decade, claiming back against interest paid, on an interest only loan and getting receipts for everything that was purchased for the property during this time to also claim. As long as rent is close to market rate you’re fine.
When interest rates went down I dropped rent when they went up I raised it so I always lost roughly the same each year. During Covid I cancelled rent entirely for a few months, it was never a problem.
You will want to discuss this with an accountant. We have done similar (but not with regular rent payments, we’re a regular help each other out type family so it didn’t make sense from a family context and full rent would be unaffordable for the family member in question so didn’t make sense from a numbers perspective) and decided to just keep it as a property for self residence because it wasn’t worth the agro with ATO to classify as an investment property. Obviously your situation is slightly different with regular payments and an investment home loan presumably? An accountant should be able to best advise you on how to structure this for tax.
I did this. The mortgage payments and misc costs have always been more than the rent I charged her, but she’s happy and secure in a rental owned by her son. That pays off in years of independence and not having to go into a nursing home.
Congratulations and well done.
Ok, so you can make this as formal or informal as you like.
Talk to your accountant because you can negative gear properties rented to family.
I’ve done the same thing.
Probably the biggest thing is that if you have a lower than market rent you are only supposed to claim up to the amount of rent paid. You can’t claim full deductions,