Hi
I am thinking to purchase a property with tenant currently living there and the lease expire this august. I am fine with moving in after august but what would be the rule if you purchase the property as your primary residential? will you be able to delay that long? i imagine the rental income would need to be declared but what about the interest?i am thinking to refinance my current loan together with this deal,so there would be some costs involved like early repayments, mortgage fee, possibly LMI, stamp duty etc which one is tax deductible and which one isnt?
cheers guys
What is the current loan on, your current PPOR? What will you do with this property when you move into the the new property, keep it as an IP or sell it? YOu can only claim tax deductions on loans that are on income producing properties, therefore if you are living in the property then change it to an IP you can claim expenses after the date that you move out.
You can ask for settlement to be delayed until August or you can state that rental payments are to be made to you after settlement until the tenant vacates the property
I had a situation a littles like yours, however i had owner occupiers in the house that i bought as an IP, they vacated before settlement and were happy for my new tenant to move in before settlement. They received the rental paymnets paid by my tenant up until the date of settlement and then these payments were made to me. I LOVE my property manager, this is the second time that she has had a tenant lined up and ready to go into my houses before or on the day of settlement. I have not had either property vacant since purchased. !! YAY!!
cheers
Sonya
Thank you sonya,
i have got around 290k loan on current ppor, i would keep it as an ip. I am looking to refinance therefore there would be associated cost involved, therefore i am not sure which costs are actually tax deductible and which ones aren't.
If i receive the rental from now till august does it mean my house is an IP on the settlement day? The stamp duty will be much higher for property if it's an IP
btw glad to hear positive outcome for your investment… i hope i would experience the same
regards
Bump
Silverx
Costs would be deductible from the date of settlement until the day you moved into the property as your PPOR.
This would include interest, rates etc.
Remember LMI, application costs are all loan fees and are deductible over 5 years or the Term of the loan whichever is the lower and are proportionalised in the first year so would depend on the number of days the property was rented.
Unfortunately even though your current property is used as security for the new PPOR the interest is not deductible once you move into the property.
Care would need to be taken to ensure you minimise your LMI and dont cross collateralise the two loans.
Richard Taylor | Australia's leading private lender
Thank you Richard for your input
it does sound abit messy doesn’t it.One more question though
“Unfortunately even though your current property is used as security for the new PPOR the interest is not deductible once you move into the property.”
why can’t I claim the interest since current property is going to rented out?
Because the ATO use the "purpose test" for the funds to decide whether the interest is deductible.
You could secure an investment loan on a herd of cows and the interest would be deductible but purchase a overseas holiday and offer your investment property as security and the interest certainly isnt claimable.
This is why you need to be vary careful and a specialised mortgage broker should be able to structure the deal for you to maximise your deductions and minimise your interest payable.
Richard Taylor | Australia's leading private lender
Wow… That really put things into perspective. The only way really is to come up with the cash deposit if I want to purchased new ppor because by using current ppor equity I wouldn’t be able to claim deduction even if it’s turned into an ip.
I’m even on the worse shape that I thought I was, coz now I would have to save that deposit somewhere else as I wouldn’t be able to pay my mortgage to reduce my loan because it doesn’t have offset account
grrrrrr
Hence loan structuring is so important from day 1.
Richard Taylor | Australia's leading private lender
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