Thanks all.

I’m still confused though. Based on the clause that Terry mentioned, does that mean I should only be paying CGT on that initial 3 months where there was a tenant from the lease rolled over from the previous owner? Even though it was rented out again after I had lived in it for a year?

• This reply was modified 9 years, 9 months ago by  brunowa.

Thanks Den,

Appreciate your response. The vacancy rates and interest rates can be easily altered to identify different scenarios..

I was more hoping to get a feel for the methodology I am using in working out whether an investment is worthwhile and that my method of calculating the tax deductions and net position is correct.

Please explain? How do you exclude interest when interest repayments are one of the biggest factors in property? Similar to tax

Damn that is quite annoying…

The reason I asked the question is that my PPOR at the moment is the property where I have paid down loan to $300k, however I would like to buy a new PPORy to live in and then rent out my current PPOR.

Is there a better method of doing this or is that extra $180k locked away in my current PPOR?

Thanks Richard/Terry, great advice.. its things like this (tax benefits) which I am yet to fully understand so I appreciate the responses.

In saying that, I should be able to use the equity in my PPOR (approximately $180k) to take out a LOC and use it for the deposit and acquisition costs of my first IP, and the interest paid on this LOC is tax deductable. I can then take out another 'normal' loan against the IP to cover the remainder of the property. So I would have 3 loans in total (PPOR 350k, LOC 180k, IP 320k… assuming a 500k IP purchase).

I am yet to fully understand LOC loans, do these have options of interest only or principal and interest and would the intention be to pay this off? If so with what funds? As I am currently paying IO on my PPOR and the new IP would be negatively geared. Hence why I was assuming it is better to use my cash as a deposit rather than increasing my loan amounts when cash flow is tight?

Terry, interesting advice, it's new to me. I always thought it better to NOT pay off the loan on the PPOR but build up funds in my 100% offset account so I would have access to my 'equity'/cash immediately to use for future purchases. What I understand you saying is that it IS better to put the money into the PPOR and then access these funds through the LOC which gives the benefit of tax deductions for future interest payments? It's effectively transfering funds from a non-deductable loan to a deductable loan.