Hi All,
I am about to inherit some money of which it will partly put towards buying an investment property.
We want to move from our current home and move closer to town and rent out our current home.
It has been suggested that we redraw our current loan to the max, negotiate a better loan before we buy the new house.
Then buy the house with the money that we redrew.
Some questions I have are
1. We are in QLD FNQ, because we are moving house and the purchased property will be our new home, will the stamp duty still be at the investment property rate?
2. Also we want to keep the house that we are currently living in because we want to move back here after the kids finish school, does anyone know if the 6 year capital gain rule would still apply to our original house, taking into consideration my previous question?
3. If we move back to our current house before 6 years, will the 6 year rule apply to the house we moved out of( that's the one we want to buy soon)?
4. Does redrawing on our current loan sound like the right thing we should be doing?
Anyway appreciate any feedback anyone can help me with:) I hope it all makes sense, I am still learning and not quite familiar with many aspects:)
Cheers
Hi there
Welcome to the forum.
Redrawing the money to fund your next PPOR isn't a good idea. The funds used to purchase the next property won't be tax deductible as they're being used for a new PPOR.
To determine whether or not funds will be deductible we apply the "purpose test" – what are the funds being used for? If the funds are being used for an investment purpose such as the purchase of an IP then it would be. If the funds were used for a non-deductible purpose (purchase of a PPOR) then they won't be.
If you're keen on keeping the current property as an IP then you need to convert the current loan to interest only now and set-up a second loan against the property which will be used as the deposit/costs on the next PPOR. That way, you can easily distinguish your tax deductible debt (the current loan against your current property) from your non tax deductible debt (the equity release against your current property which will be used as the deposit/costs on your next purchase).
Hope that helps.
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hi, to add to what Jamie said.
People make the mistake of thinking if you up the loan because you're making it an investment property that you can then claim all the money as a tax deduction. This is not the case.
Regarding the 6 yr rule-
You can apply the 6 year rule to only one PPOR at a time. So if you apply it to the first house you will pay capital gains tax on the second one. If you claim the second as your PPOR then you'll pay CG on the first one (for the time it is rented). Calculate to see which is better financially for you.
Hi Guys, thanks so much for your feedback:)
Ok, so why would suggest an interest only loan Jamie, I haven't quite got my head around them yet? Is there another way I can get around it, our loan on our current house is only $95,000. We were hoping to boost that up, who checks on your financial's to determine where the money is spent ?
Before you do anything best to get legal advice as there are a few tax and asset protection strategies you could implement.
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
Where is the best place to get legal advice on this type of thing?
If you're new to property there's a great webinar on tonight at 8pm AEST and it's free.
Here's the link: https://www4.gotomeeting.com/register/984097743
Mosaicrocks wrote:Where is the best place to get legal advice on this type of thing?Contact Terry W
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hey Mosaicrocks,
You mentioned you had some questions you had about stamp duty.
To help you out, and others who are curious, you can always check out the official QLD Government Office of State Revenue Stamp Duty Calculators, which will give you an estimate of how much you need to pay based on different dates and circumstances of your transaction.
You could also just contact them directly, if you want a more specific answer about stamp duty, as they've been responsive to me when I had a few complicated questions.
Hi Mosai
Sounds like a possible Spousal Transfer opportunity.
Be surprised how many of these we are doing in Qld at the moment.
Course going to depend on a few factors but that way you could possibly claim the interest on the full value of the current property whilst using the new proceeds as deposit on your new PPOR.
If you are unsure of which property you intend to reside in long term might be a matter of using a TD as security and keep the borrowing fully drawn.
Careful loan structuring needed to maximise your deductions.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
how strange!
So strange it is funny.
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
Cheers Richard? Just wondering what a TD is?
Hi Terry:) What is strange??
Cheers Matthew:) I have used stamp duty calculators but didn't go to the source, so cheers I'll look into it tomorrow:)
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