Forum Replies Created
- god_of_money wrote:Whilst its not an elegant solution, and possibly more effort than its worth.. you could sell the 470k property, pay out the $60k owing, purchase another rental/investment property at an LVR of 80% or 90%, and use the remainder of the proceeds of sale to reduce the current loan on the investment property you moved into. This would allow you to claim the majority of the interest your paying against your new rental property.
Hope this helps!
very costly exercise…
Thats very true..
but there wouldnt be any CGT, and the short term costs would balance with tax benefit in a few years when your talking about the tax deductibility of interest on around $400k! Still – its not a strategy I would recommend lightly..
Hi Samsons,
Whilst you can transfer the security for the loans from one property to the other (which is what the bank is talking about), you can not change the principal purpose of the loans, which effects tax deductibility.
To put it another way, if you move into your investment property, then the funds you borrowed to purchase that property will become personal, and the interest you pay on those funds will not be tax deductible, you can not change the purpose for which you originally borrowed the money.
This page at the ATO explains this situation somewhat:
http://www.ato.gov.au/individuals/content.asp?doc=/content/00113233.htm
(check out the zac and lucy example)Whilst its not an elegant solution, and possibly more effort than its worth.. you could sell the 470k property, pay out the $60k owing, purchase another rental/investment property at an LVR of 80% or 90%, and use the remainder of the proceeds of sale to reduce the current loan on the investment property you moved into. This would allow you to claim the majority of the interest your paying against your new rental property.
Hope this helps!
Its a complex issue.
Firstly, the sale of the new block will indeed be a capital gain tax event. Secondly, regardless of whether you build, or sell vacant, you will be entitled to the 50% CGT discount, as you have owned that land for more than 12 months.
The cost base of the land, will actually be the appropriate portion of the ORIGINAL purchase value. You need to get a valuation, with regards to how much the new block is worth, as a portion of the entire property, and apply that fraction to the original purchase price. So your final cost base for CGT will include: portion of original purchase price (& stamp), portion of subdivision costs, finance/interest costs, rates etcetera, and construction costs.
Furthermore, if you intend to construct a dwelling and sell it within 5 years of construction, you need to register for GST. Claim the GST on your expenses during construction, and you will have to pay GST out of the sale value.
Further reading:
subdivision of PPOR and cost base:
http://www.ato.gov.au/individuals/content.asp?doc=/content/36907.htmnew residential properties & GST:
http://www.ato.gov.au/businesses/content.asp?doc=/content/00197808.htmHope This Helps…
ladybird wrote:Is it sufficient for us to just record GST payments we make during the development and if subsequently deemed to be subject to GST on or after selling, register for the GST then so that we can claim back GST paid? Or do we need to register for the GST now, even though it may turn out not to be an issue, to be on the safe side?GST will be payable on the sale if the property has been rented for less than 5 years. Whether or not to register now is a complex issue, but essentially it depends on your current ‘intention’ – if you intend to sell within 5 years of construction then technically you are supposed to register now. If your intention is not to sell within that period (sounds like it) then you do not have to register. Then, when and if your circumstances cause you to change your intention, and you sell the property within 5 years, you would register for GST at that point, and you would be able to claim the GST you have paid, by means of an adjustment.
gst on property sales:
http://www.ato.gov.au/businesses/content.asp?doc=/content/00197808.htm&page=2&H2gst adjustments:
http://www.ato.gov.au/businesses/content.asp?doc=/content/44300.htmhope that helps…
