Hi there,
Here’s a hairy question for you:
We are using 90% equity from both our IPs to purchase another IP shortly.Q1: If after 12 months we decide to make IP 3 an Owner occupied home do we have to pay full stamp duty again?
Q2: When we move in and make IP 3 our principle home, will we still be able to continue claiming the interest paid on the equity borrowed ($75,000)to purchase the property? (as its now part of the total outstanding amount for IP 1 & IP 2 homeloan)
eg: IP 1 & IP 2 are with one lender, we will use $75000 equity for IP 3. This will take our loan from $532,000 to $607,000 interest only loan at 5.99% for 30 yrs.
IP 3 is with another lender for about $520,000 at 6.44% for 30 yrs.
If we convert IP 3 to an owner occupied home, will we lose the tax return on the interest paid on the $75,000 equity borowed from IP1 & IP 2? ie) Our tax return will be calculated on interest paid on the original $532,000 instead of $607,000 (as $75,000 has now been used as a owner occupied home)??
Hope I am making sense here……[blush2]
Cheers,
LeoniQ1 – Only pay SD on the purchase. Once you change usage you don’t pay it again.
Q2 – Tax deductibility will cease when it is no longer available for rental.
Hope this helps a little.
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985NODOC Loan – 65% Loan – No questions asked!
Comments 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,
Yes, that answers most of my queries, what about tax deductability on the original $75,000 used to purchase IP3? As it now forms part of IP1 & IP2 homeloan (both which will remain IP’s and are rented out)?Will the ATO say, hey Leoni I know you originally used the money to purchase IP3 but now 12 months later you’ve converted to owner occupied so it no longer forms part of your IP1 & IP2 loan and hence is not tax deductable from this day forward?
Cheers,
LeoniHi Leoni,
Not nan accountant but as the purpose of loan has now changed from IP to PPOR related that portion is not tax deductible.
You would be well advised to talk about this with your accountant and broker and splitting the loan portions into separate loan/s as mixing investment and non-investment loans is paramount to a financial headache for you and your accountant.
As things stand at the moment any principal repayments are apportioned across all three properties – if you split the loan/s you have capacity to make the investment loans interest only to reduce your outgoings and the capacity to put any surplus cash against your non-deductible debt.
I would also recommend establishment of an offset account against PPOR loan.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
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