Don't know if anyone can help, but would appreciate any feedback. We are looking at borrowing 100% to buy a new home. We will be keeping our existing home which is currently debt free & renting it out. If we were to have the bank take out a mortgage over both properties, can we negatively gear part of the loan & if so how much i.e. would it be the value of our existing property today or would it be the original purchase price from 12 years ago.
Hate to be the bearer of bad news but non of the interest on the new loan will be tax deductible as the purpose of the new funds is not for investment.
The security offered is imaterial the ATO look at the purpose of the borrowings.
Only alternatve would be to look at crunching the numbers on selling the property to a Unit Trust where you both are Unit holders.
Richard Taylor | Australia's leading private lender
This is one of the most common wrong things to do to activate a tax audit of your tax affairs by the ATO as they look for this common mistake when checking tax returns.
If only you had used an offset account….
You could also look at selling to your spouse or if already owned by 2 sell one half to one spouse – so you could at least claim half the costs.
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
Terryw,
Will it trigger CGT if sell to the spouse (i.e. removing the name completely) and also Stamp duty?
Would prefer to sell it to DFT ?????Yes. Unless they get a divorce and having a court order to transfer property.
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
divorce and court order… this will earn $$$ towards lawyer's pocket..
What do u normally suggest to your client if this is the case?
Sell the property into Trust as mentioned previously.
There wont be any CGT as it was formally a PPOR but Yes there will be Stamp Duty.
It all depends on a number of conditions as to whether it is worth it.
Richard Taylor | Australia's leading private lender
Yes I agree with you Richard.
But It must be positively geared (i.e. rental income + deprecitation – land tax, council fee, management fee etc) and distribute to the lowest income. you have to hold it for the long term in order to recoup the stamp duty loss.
And buy again few millions dollars of PPOR
to avoid CGTGOM
Think we might be at cross purposes.
All you would so is sell the current PPOR either to a Unit Trust with the highest marginal tax payer holding the units or altenatively buy 50% from your spouse.
Depending on the property valuation and your marginal tax rate the stamp duty cost can be made up within the first 12 -18 months quiet easily purely on the interest savings alone.
Obviously the higher the marginal tax rate the more advantagous the numbers become.
Richard Taylor | Australia's leading private lender
Richard,
Is there any reason why you choose Unit trust instead of DFT if it is positively geared?Cheers
If it is positvely geared I would establish a DFT if it was negatively geared and you need to claim the interest, Dep, BWR etc against Tax then a UT is the recommend choice of Trusts.
Richard Taylor | Australia's leading private lender
Thanks Richard for your info.
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