OK guys new to this forum. Looking for some advise here.
Me and wife have recently bought a new home (to suit our life with 2 kids). Our old PPOR is in a much sought after suburb of Adelaide (Norwood). However the property is a townhouse and does not suits our needs currently.
The situation is that our Norwood townhouse is almost paid off and we had to borrow a fair bit for our new property. We can easily rent our T/H for $320/ week with almost 80K owing on it.
New house nearly 300K owing and can quite easily pay the minimum payment plus a bit extra p/f.
Question here is
Do we sell our Norwood T/H and be mortagage free (that T/h can sell for about 400K, is fully renovated and to 2004 standards.Save on CGT as within six months new PPOR rule.
Hold on to T/h use the rent towards our new mortgage and leave some for T/H expenses for next 5 years . Bank does not expects any payment on T/h till 2009.Hang on to the T/H as long as we can. However T/H only have so much to gain . But the thing going for it is it can rented at the drop of a hat and big LOCATION LOCATION LOCATION. We probably can never then get into Norwood.
Take the money out from redraw in T/H or refinance and bring our new mortgage down and then work on paying T/H off. However the interest on the new mortgage is not tax deductible as per ATO.
So what do we do. Got a lady friend who is a Jenman RE and she reckons if you hold it for another 10 you will double the value of what it is worth today.
Do not want to take a silly decision that will repent forever. I am 31 …
Oh BTW with new mortgage we can live very comfortably however one of our passions is travelling to off beat places in world and this certainly will restrict that.
Please feel free to advise.
Thanks heaps.
Regards
Wow 24 people have already read my post….
Waiting for your feedback now patiently.
I must admit that looking back I have regretted the sale of every property I sold…
Tax wise you are in the wrong position with your debt against your PPOR.
Here is one idea.
Transfer the townhouse into another name – a spouse or a trust. Take a 110% loan out against it and place the funds (after costs) into an offset account on your current PPOR.
This will improve your tax position markedly.
Downside is the costs including SD.
However, you will also have no CGT on the “sale” of this ex PPOR if you do this within 6 months og moving into the new PPOR.
Hope this makes sense,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Todays Hot Rate
***3 year fixed – 6.49%***Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Transfer the townhouse into another name – a spouse or a trust. Take a 110% loan out against it and place the funds (after costs) into an offset account on your current PPOR.
There are stamp duty issues with this. Full stamp duty (at SA Govt exhorbitant rates) may be payable.Increasing loan on current place to buy another has issues re what is tax deductible and what is not. There are other streams covering this. Basically, the tax deductibility of interest depends on the purpose of the loan (or part of).
Originally posted by mum:Transfer the townhouse into another name – a spouse or a trust. Take a 110% loan out against it and place the funds (after costs) into an offset account on your current PPOR.
There are stamp duty issues with this. Full stamp duty (at SA Govt exhorbitant rates) may be payable.Increasing loan on current place to buy another has issues re what is tax deductible and what is not. There are other streams covering this. Basically, the tax deductibility of interest depends on the purpose of the loan (or part of).
Mum,
I mentioned the SD.
What are the tax implications you are worried about?
The new loan is to buy the old townhouse (remember a “sale” has occurred as the title is being transferred). So the purpose is to buy an IP therefore fully deductible.
Placing the funds into a offset means that should this situation occur again then the money can be transferred from the offset to a new PPORand the existing debt then becomes tax deductible.
Please feel free to correct me if I am wrong here – but make your point instead of just raisig doubts as to the veracity of my suggested strategy.
Kind regards,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Todays Hot Rate
***3 year fixed – 6.49%***Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Thank you Simon & mum.
Simon,
Both properties are joint tenants.
If I refinance the T/H and take the money out and put it in a offest against the new PPOR does that makes the new interest on T/H tax deducitble or not ?
BTW my wife does not works and has no income. Her part of the -ve gearing gets wasted (accumulated) anyway !!! However will save CGT later.
If I refinance the T/H and take the money out and put it in a offest against the new PPOR does that makes the new interest on T/H tax deducitble or not ?
This wont be deductible. because in this case, the purpose of the loan will be to put funds into your PPOR.
This is why a change of ownership with a whole new loan needs to be considered.
Your wife cannot borrow for the IP so consider a trust as the new ownership entity. If you want to consider this path I would strongly suggest that you seek an experienced accountants advice.
Cheers,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Todays Hot Rate
***3 year fixed – 6.49%***Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
I would sell old PPOR. Put the funds in new PPOR and buy a place in Norwood that is 110% borrowed.
There are no tax implications here. You get full tax deductibility. You get to live a little easier on your tax refund cheques.
Downside is you pay agents fees in selling and stamp duty on new purchase. But thats nothing in 10 yrs time when the place doubles in value.
However talk to an accountant and see if you can re-structure by selling to a trust or something like that. I am not sure how that works. There is also a possibility the ATO may object.
Thats what i did back in 1999 when we started our family and upgraded from a unit to a house.
Our PPOR mortgage is almost $nil and our investment property bought then has doubled in value.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
