We currently work our PPOR loan that everything goes on more or less and we redraw once a month to pay out our credit card (day before interest hits, redraw is free).
In a few months we’ll buy new PPOR and turn this one into our first IP. I am wondering if we should set up a separate account now and redraw back up to the max (which is still less than 50% or the PPOR value) and just pay the minimum on our current loan and save for the new PPOR in a separate account, such that the financing is separate from now on.
My concern here, is if we continue to just chuck it all onto the loan, and then redraw 20k+ to purchase the new PPOR when we go IP on this house, will the ATO check out this anomaly? This house will be CF+ with the loan redrawn to its maximum, so we’d rather take as much as we can to the new PPOR to lower the loan we’ll need to take on it.
Help? Advice? (hope I’ve made sense)
Dreamer,
You have a tax problem.
What ever you redraw is seen as a new loan and the deuctibility will be determined by it’s purpose.
If it goes towards your new PPOR then it isn’t deductible.
This is where saving in an offset would have been better as it preserves the original loan.
The only way around this is to transfer ownership of the property and reborrow 100% to buy it. ie sell it to a spouse or a trust. Stamd duty will be incurred so it wont be cheap.
Sorry to be the one to give you the bad news.
Regards
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Thanks Simon, though I’m not thrilled with the situation! LOL
What if we redrew and used that money for other things (ie pay off cc and finalise payments on renovations) and then just kept saving seperately (as an increased rate given we will be using redraw for these purposes).
Sam
To use the money for anything else than investment streams of income would deny the deductibility.
Your idea will speed up your savings rate.
It wil lalso increase your serviceability for the next loan.Cheers,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
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