Hi,
We have paid off our current home (PPOR), which is worth, say $400K.
We want to buy a new property (about $600K) and to live in it (so it will become our PPOR), while keeping current home as an investment property. However to buy that new property we need to borrow about $300K, without selling the current home.
If we take out a loan for the new property, interest paid will not be tax deductible because the loan is for PPOR. Is it possible to set up the finance so that we own the new property outright, and the $300K loan is owed on the $400K property (which will be IP and hence interest is tax deductible) ?
Thanks
Hi HT
This is the most commonly asked question we get from our clients and the simple answer is Yes / No.
It the normal course of events then then the answer is NO as the ATO definition of deductibility must pass the “Purpose Test” and the funds clearly are to be used to purchase a PPOR.
In saying this structured correctly and regretfully with a bit of stamp duty then the entire amount can become deductible.
Presently we have clients on a weekly basis who go through the same process so nothing is uncermountable but it just take a bit of consideration and few calculations.
Things we would need to know before we could could provide an accurate answer would include:
1) The names the current PPOR is in.
2) The original purchase price and date of purchase.
3) The State in which the property is in.Happy to help out if you can give us more information.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
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