FHOG and negative gearing

I think you can do this. I have found a lot of lenders dont like you taking out IO loans for PPOR, this isnt to say it cant be done. You can also avoid CGT if you move back into your investment property within 6 years. You just need to live in it again for atleast 6 months  and not purchase another PPOR.

Remember stamp duty excemption is only up to 500K and then is worked on a sliding scale up to 600k.

Hi Sweeny

Yes the strategy you describe is exactly what we would recommend to any new investor starting out who hadnt previously purchased a PPOR.

Agree with Steve that a lot of lenders dont like doing an interest only loan on your PPOR but there are still a few that will do.

Your Broker should be able to give you a range of lending options.

I have read a recent article explaining how people who purchase a PPOR and then transfer it to an IP, are to some extent taking advantage of a small loop hole within the system. Its designed  for people who need to move for work related purposes etc.
I am unsure how they can regulate this, or if it's regulated at all, but looks like a good strategy if you can get some good tax breaks from it.
Remember the building has to be newer than 1985 to claim depreciation from the building, which i would imagine takes up a decent portion of what you can claim, im certainly no expert on the matter, other than that it would just be the appliances and the tax breaks from negative gearing, if it is.
I would be looking for a newer building, and nothing built prior to 1985 to get the most out of it.
I also dont see why you cant just redraw the principle from a P&I loan every few months, and use those funds to renovate, which can then be claimed against depreciation for tax. (carpet, kitchen etc).
Please feel free to correct anything i have mentioned. I am learning  a lot as i go here.
this website is great.

If you are buying the property as a long term IP but in the short term (6 months) as a PPOR in order to get the FHOG, can you still use the proposed rental income as part of your loan application to incease your sevicabiltiy?

That's an interesting question. I wonder, if a loan was allowed under that pretext and the government got upset about it, would the buyer or the bank be liable.

I plan to by a PPOR with savings as deposit, so aren't really concerned about the 100% thing. I do plan to turn it into an IP after 6 months though, to use the tax savings to pay the residual down quicker. An extra 10k or so on the loan every 12 months, over 15 years, will make a massive difference to the length of the loan IMO.

All the time:) You should try working for them.

That's not what I meant, though. The scenario where you use future rental income to secure a PPOR loan shows the buyer's mindset from the outset and that mindset is not in line with the requirements of the grant.

It is one thing to put some money down for a PPOR and get the grants with it and then change your mind later, as far as the bank is concerned. It is another for the bank to have recorded proof that the purchasing intent was never for a PPOR.

Personally, I don't recon the banks would consider it but it would be interesting to find out.

see s 8.1(1) of the Income Tax Assessment Act 1997