Move to Osborne St. Monica moves into 713. Her rent covers your mortgage and ATO deductions land in your pay each fortnight.
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net weekly cashflow (everything — incl rent paid)
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CGT you avoid — 6-year rule
The cashflow in plain English
You move to Osborne St and pay $650/wk rent. Monica moves into 713 and pays you $580/wk. Your mortgage repayment is $2,446/mo ($564/wk). Monica's rent covers that and then some. 713 becomes an investment property, so interest, body corp, rates, insurance, maintenance and depreciation are all tax-deductible. The ATO refunds that at your bracket — either fortnightly via PAYG variation or at tax time. The 6-year CGT absence rule means 713 stays your PPOR for tax — sell within 6 years and all capital gains are tax-free.
How the tax mechanism works
Rental income is taxable — added to your salary at tax time. But every IP expense (interest, body corp, rates, insurance, maintenance, land tax) plus depreciation (a paper claim) gets deducted. If deductions exceed rental income, the difference is your net rental loss — and that loss reduces your taxable income at your marginal rate. So the "tax refund" you see is calculated on the loss only, not on gross deductions. Lodge a PAYG variation to get the saving fortnightly via your pay rather than waiting until tax time.
Why the cashflow works in your favour
Five financial mechanisms that change once 713 is an IP
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Monica covers your mortgage
$580/wk Monica rent covers 100% of your $564/wk repayment. You hold a Footscray asset for almost nothing out of pocket.
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The ATO pays you back
Interest, body corp, rates, insurance, maintenance and depreciation all deductible. Roughly 32.5c per dollar back — in your pay fortnightly via PAYG variation.
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Zero CGT for 6 years
713 stays your PPOR for tax purposes for up to 6 years. Sell within that window — every dollar of growth is tax-free. Just do not nominate another property as PPOR.
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Equity builds two ways
Monica's rent pays down your mortgage. Footscray appreciates. Wealth builds without you spending more out of pocket than today.
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Cashflow you can redirect
Net positive weekly cash from the IP can be redirected into an offset account on the 713 loan — knocks years off the payoff timeline.
Why short-term cashflow is not the whole story
The weekly diff below is what the arrangement looks like in year 1. Rent grows ~3%/yr, costs grow slower, the loan principal pays down, and the property appreciates. The real return shows up over time — here is what the arrangement builds for you over 10 years:
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Total wealth built over 10 yrs
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Equity in 713 at year 10
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CGT avoided (6-yr rule)
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Year cashflow turns +ve
Before vs after — your weekly cashflow
What changes financially each week once 713 is an IP
As your home (current)
Mortgage repayment
Body corp
Council rates
Rental income$0
Tax deductionsNone — it is your home
Weekly cost of 713
As an investment property
Monica pays you rent
Mortgage repayment
Body corp + rates
Insurance + maintenance
ATO tax refund (in your pay)
Rent you pay (Osborne)
Net weekly cashflow
Weekly diff vs staying as your home (includes rent you pay elsewhere)-
Your figures — edit anything
All numbers update live. Pre-filled with confirmed figures — adjust if anything has changed.
Loan Structure
Owner-Occupied (current): Your loan today is an owner-occupier loan. If you switch to IP, banks typically reprice the rate up by ~0.5%. Toggle to see what rate would apply.
📋 Optimised defaults applied: refinanced rate 5.5%, proper QS depreciation report, top-of-market rents, $2k/yr accountant + records claims. Adjust any input if your actual figures differ. The page recalculates live.
Confirmed from bank
Market rate 1-bed Footscray
$1,961.76 × 2/yr ÷ 52
$1,464.47/yr ÷ 52
VIC: apartments often $0 (under $50k threshold). Check assessment.
From QS report — paper claim only
Industry standard 4%: ~2 weeks/yr empty between tenants
Long-term avg ~3%/yr
Body corp, rates etc grow ~2.5%/yr
QS report (~$500), accountant (~$300)
Footscray 10yr avg ~6-7%
Where these rent figures come from: The $580/wk Monica rent and $650/wk you pay for Osborne are based on current market rates for comparable apartments. Domain and REA listings for similar units in Footscray and Williamstown were checked. The IP rent must be at market rate — the ATO requires it for deductions to be allowed in full. You can adjust any figure above.
What is depreciation? A paper deduction the ATO gives you for the wear and tear of fittings, carpets, appliances and the building structure. You spend no cash. A quantity surveyor visits once (~$500, itself tax-deductible) and produces a yearly schedule of exactly what you can claim. It reduces your taxable income the same way interest does — but costs nothing out of pocket beyond that one-off fee.
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Weekly rental income
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Weekly diff vs as home
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Annual tax saving (after rent income)
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Weekly in your pay (PAYG)
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Monica covers X% of mortgage
Annual Rental Position (Tax)
Rental income (taxable)
Mortgage interest (interest portion only)
Body corporate
Council rates
Landlord insurance
Maintenance
Land tax
Depreciation (paper claim — zero cash outlay)
Total annual deductions
Net rental loss (deductions − income)
Tax refund (or owed) at % bracket
The long-term picture
What holding 713 as an IP does for your wealth over time
Today
Year 3
Year 5
Year 10
713 Buckley value
Loan remaining
Your equity
Cumulative tax saved
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in capital gains tax you avoid — if you sell within 6 years
ATO 6-year absence rule. 713 Buckley stays your PPOR. Every dollar of growth is tax-free. Do not nominate another property as PPOR.
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Estimated total wealth built over 10 years
Footscray growth + loan paid down by Monica's rent + 10 years of ATO tax savings.
⚠️ PPOR designation rule
Only ONE property at a time can be your "principal place of residence" for tax purposes. The 6-year CGT exemption above assumes you nominate 713 as your PPOR for tax (even though you live elsewhere). If you nominate a different property as PPOR, 713 will be subject to CGT pro-rata on any gain. You can change designation later, but only one property qualifies for the exemption at any given time.
How the cashflow pays off 713 faster
Without IP cashflow you pay the standard repayment alone. With it, Monica covers your mortgage and the IP generates net positive cash you redirect straight back into the loan.
Auto-calculated: extra monthly repayment = your weekly ATO refund (PAYG variation), converted to monthly. This is genuinely new cash created by the IP arrangement — without IP-ifying, the refund does not exist.
Without IP cashflow
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years to pay off 713
Monthly repayment-
Total interest paid-
Own it outright-
With IP cashflow redirected
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years to pay off 713
Standard repayment-
Extra from ATO refund-
Total interest paid-
Own it outright-
Without IP cashflow-
With IP cashflow redirected-
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years earlier you own 713 Buckley outright
Interest you never pay: - Monica's rent + ATO refund generates this — no extra cash from you required.
What needs to happen — 4 steps
Steps to make this real.
1
Sign a written lease with Monica at $580/wk
The ATO requires a written lease at market rent for deductions to hold. Without one, deductions can be reduced or disallowed. One page, signed by both of you.
2
Lodge a PAYG withholding variation
One-page ATO form. Tells your employer to withhold less tax from each pay — so the saving arrives fortnightly, not as a lump sum at tax time. Free, takes about 10 minutes online.
3
Get a depreciation report for 713 Buckley
A quantity surveyor visits and tells you exactly what you can claim each year. One-off cost ~$500, tax-deductible. The figure in this calculator is an estimate — the report gives you the real number.
4
Open an offset account and redirect the IP cashflow
The payoff acceleration only works if the freed-up cash actually hits the mortgage. Ask your bank to open an offset account on your 713 loan and redirect the monthly IP cashflow straight in — it cuts your interest immediately.