i live with parents and i have just bought my first property (1bedroom apartment) off the plan with settlement due dec 2010. i wish to live in for 6 months to get my fhog and then immediately buy a PPOR.
i intend to put all of my money on the apartment at time of settlement.
when i buy my PPOR 6 month after settlement of apartment, i intend to take out a seperate loan. i then would like to transfer all my money onto the PPOR loan and have 100% loan owing on the IP.1. Will i run into any problems with ATO?
2. how would anyone else tackle my scenario differently?
3. I want to reduce the tax i pay asap, if i buy another property with settlement before that of my first property described above and rent out, will i still get the fhog on my 1bedroom apartment descibed above?advise/opinions appreciated
1 – yes as the reason you are withdrawing the funds is not for investment but for private use.
2 – put the money into an offset account not into the loan, that way you will not be redrawing on your loan but utilising any spare capital available to you. If you then get the property revalued and draw down this equity for your own use, this too would not be deductible.I agree with Scott. Get a high a loan as possible and put all spare cash into a 100% offset. otherwise you will be borrowing money (redraw) again for the new main residence and this interest won't be deductible.
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
jetweapon wrote:i live with parents and i have just bought my first property (1bedroom apartment) off the plan with settlement due dec 2010. i wish to live in for 6 months to get my fhog and then immediately buy a PPOR.i intend to put all of my money on the apartment at time of settlement.
when i buy my PPOR 6 month after settlement of apartment, i intend to take out a seperate loan. i then would like to transfer all my money onto the PPOR loan and have 100% loan owing on the IP.1. Will i run into any problems with ATO?
2. how would anyone else tackle my scenario differently?
3. I want to reduce the tax i pay asap, if i buy another property with settlement before that of my first property described above and rent out, will i still get the fhog on my 1bedroom apartment descibed above?advise/opinions appreciated
1. It is rather messy tax wise – you would be better setting up an offset account and put spare cash in it against the PPOR and thus reduce the interest charged on the loan.
Then when you need the cash for a deposit on the PPOR you can set up a new offset against it and put spare cash in it or use cash as deposit.
2 see point 1.
3. go to http://www.firsthome.gov.au/ and select the state you live in. And click on more information.
This will take you to the state revenue office of your state.
Email them and ask if you can purchase an IP and rent it out and if it will effect your elligiblity for FHOG
It really depends on which state you live in.
Queensland is different to say NSW and Vic.
See http://www.osr.qld.gov.au/first-home-owner-grant/eligibility-fhog/index.shtml
For how you may be able to in QLD but other states are different.
You want to reduce your tax –
What tax marginal rate are you on ?
$80,000 – 180,000 is 40%
So you have to lose 100% so you can get back 40% from the tax deduction.
You may be able to claim depreciation as well.
Also factor in interest rates rising in to see if you can afford to lose money.Thank you for the feedback. I have been playing around with different scenarios in spreadsheets….
Consider that i will have a PPOR which i will owe say 150k on and a IP which i owe the full amount on say 350k. I have calculated that the IP will cost me approx 7k per year after calculating the tax savings from depreciation and all other deductions and at a interest rate of 8%.
I do not see how i am benefiting from owning the IP if it is costing me 7k per year. In terms of cashflow, i will be paying 16k over the year. After tax i will be at a loss of 7k for the year. Am i better off paying off the PPOR first then buying a IP when I and the person renting can both pay off the IP? Is it common to owe the full amount on the IP and have it costing you money rather than making you money? Am I taking the right approach?Your advice and opinions are much appreciated
Yes, it is common for IPs to cost money initially. But the idea is that they will be growing in value more than they will cost you. (not always the case though).
Have you conisdered setting up your loans so you could borrow this shortfall so that it is not taking money away from paying off your PPOR?
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
Are you suggesting that instead of paying the bank the interest repayments or paying body corporate fees for example with my own money that i should pay these expenses by increasing my IP loan amount?
I would suggest you do a search here for some recent threads on capitalising interest. You could set up a LOC and then use that for all IP expenses and keep your cash for your home loan – you would save heaps of tax along with paying your home loan off sooner.
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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