Viable Or Not

Viewing 4 posts - 1 through 4 (of 4 total)

Spitfire
Member
@spitfire
Join Date: 2005
Post Count: 1
September 3, 2005 - 12:41 pm
Hi Everyone,[blush2]
I am very new to property investing and I have been reading a lot and listening a lot and I have been looking for my first IP.
[blush2]Could anyone please help to guide me on the following situation that has come up.
We currently own family home which is in a great location.Approx Value $150K
I have the oppurtunity with work to move to Ballarat.
Take out LOC on current family home say $60k and use this to put a bigger deposit on the loan we would need for the Ballarat home we will live in.
Rent out old family home Approx $600 month and put this back into LOC until cleared and then it is positive income.
Is there advantages doing it this way as I own the property I wish to rent out or does it complicate earnings and tax issues?
Any help would be greatly appreciated.
Spitfire
Pro-Active
Member
@pro-active
Join Date: 2005
Post Count: 66
September 3, 2005 - 1:03 pm
Hi Spitfire
The good thing about renting out your old PPOR is the fact that you are able to do this for up to 6 yrs before incurring any capital gains tax.
Cheers,
Pro-Active
http://www.invested.com.au Australia’s premier Investor Education site
Terryw
Participant
@terryw
Join Date: 2001
Post Count: 16,213
September 3, 2005 - 1:41 pm
From a taxation viewpoint, there would be no benefit.
Getting a LOC on the current property to use as a deposit on the new property you live in would not make the interest deductible.
The LOC interest must be attributed to the purpose the funds are used for.
Therefore if you rent out your current home, there would be no interest claimable, and you would be receiving rent, so it would probably be cashflow positve from day 1.
This would likely result in extra tax being paid.
Also, you would need to borrow to buy the new house, and the interest on this loan would not be deductible.
Depending on your future plans, you may want to consider:
– selling the current house (to your wife, your trust, or to a thrid party), or
– Rent in Ballarat, or
– Just keep, and buy in Ballarat.
Terryw
Discover Home Loans
North Sydney
[email protected]
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
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Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Dazzling
Member
@dazzling
Join Date: 2005
Post Count: 1,150
September 3, 2005 - 11:42 pm
Excellent reply Terryw. Spitfire, your question has been very elegantly answered.
We’ve been in this situation twice before. We chose the first alternative of selling to the wife, paying the stamp duty, and it worked really well. Depending on which state you live, you may even be exempted or receive a discount on the duty payable.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”