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  • Profile photo of PPR remortgagePPR remortgage
    Member
    @ppr-remortgage
    Join Date: 2011
    Post Count: 3
    May 12, 2011 - 1:03 pm
    ALF1 wrote:
    Hi PPR, and welcome to our Forum.

    You can swap and you can reverse your current PPR with your IP. But, with regards to the tax implications however, if you are using a 221d variation then that shouldn't change if your leverage remains the same but your claimable depreciation allowances will change if your current PPR is older than your current IP.
    In regards to your finances, the biggest hurdle I see you facing is that on a re-finance lenders won't lend above 90% so if you took out a 100% loan and haven't experienced enough capital growth it may be a costly exercise.
    SUMMARY: you should talk with a mortgage broker as well as someone who is qualified to help you factor in the tax implications of making these changes.

    Anthony,

    Thankyou very much for this reply. Can I clarify this?

    How does the PPR being older change things? I have lived in this PPR for 8 years and made $300k profit on the original $200k purchase price. The bank Val came in at $500k.

    I have not settled on the new investment property yet. If I swap loans to reflect my current PPR as my new investment property, I would change the loan to interest only and max up to about 450k – 500k depending on my bank. I would then only owe $330k odd on the new property and happily pay that property off with priciple and interest.

    This would reduce my negative gearing rebate but is more a lifestyle choice. If I go with original plan and rent out the new address, I can claim all 600k of interest loan. I would have thought this is a no brainer for the ATO to allow?

    Is there a way to clarify with the ATO?

    Profile photo of PPR remortgagePPR remortgage
    Member
    @ppr-remortgage
    Join Date: 2011
    Post Count: 3
    May 12, 2011 - 12:37 pm
    Terryw wrote:
    Deductibility depends on the purpose and use of the funds borrowed. So if you borrowed $200,000 for an IP and that IP becomes a private residence then the interest on that $200,000 will no longer be deductible.

    What you could do is talk to a tax expert about setting up a LOC on your PPOR, in addition to your $170,000 loan, and then use this loan to pay the interest on your $170,000 loan. ie borrow to pay interest. The freed up cash, together with wages and rents, can then go into a 100% offset account against the new loan (new PPOR, current IP). This will free up cash to pay down the private debt fast while increasing your deductible debt.
    This needs careful planning thous, don't do it on your own

    Thanks, just wondering about the legality of this?

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