Hi, I am new here so please bear with me.
I have an IP with a loan of $140k (current value $320k) 100% in my name and a PPoR with a loan of $260K (Current value $290k) 50/50 with my husband. As the two places are 2bdr town houses I would like to buy a 3 bdr house as a second investment property and negative gear it for a couple of years with the potential to later move into it.
If I increase the loan on my 1st IP by say $100k (to $240K) and use this as a cash deposit for a 2nd IP (looking at up to $400k purchase) I can claim the interest as a deduction for Tax purposes as it is still an investment, however, if I eventually move into the second IP, would I have to stop claiming interest on the $100 as a tax deduction? (is it based on the initial intention as an investment or does it change as my usage changes?).
The other option I have considered is selling 50% of the IL to my husband and then use this as a cash deposit for a second IP to eventually move into (leaving the IP high and my future PPoR as a lower loan). Only problem with this is that I need the tax deductions, being in the 40% tax bracket, whereas my husband doesn't, being in the 30% tax bracket.
I could be completely missing the mark here but know there must be a way I can better structure my Investment and PPoR loans to be in the best financial position I can be.
Thanks in advance,
Katie
you could claim the interest on the increase while it is being used to fund an investment, but once you move into it you cannot.
you could sell half of IP1 to husband, but you would have CGT and stamp duty to worry about.
Maybe you should look at setting up a LOC and using this to fund any shortfall on your investment loan and to pay all expenses. The money you would have used to pay these should go into an offset account attached to your exisitng PPOR loan and then when you get the new PPOR change to a offset attached to this. Also change the exisiting PPOR to IO to keep the balance highish to save tax when it becomes an IP. If you have a good accountant, you may even consider paying all the interest on your investment loans from your LOC – this should be possible as long as you are not doing it for tax reasons!
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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