This is my first post, and I need some advice from more experienced people please.  I have been living in property one for the last 8 years.  I have always paid $200-$300 extra on the  mortgage every week.  Therefore I accumulated an extra $50 000 in the redraw account.  I also received an inheritance and put that $50 000 in the redraw account as well.  The balance of the loan was down to about $4000.  My intention was to buy another apartment, and I was simply using the redraw account as a savings account with this in mind.  This seemed to be the best way to go, as the rate in a savings account was a couple of percentage points lower than the rate I effectively received in the redraw account.  

I have now purchased property two.  I have used the $100 000 accumulated in property one's redraw account as my deposit on property two.  I now wish to turn property one into an investment property ( $400 000 property with a mortgage of $104 000)  and move in to property two.

Am I able to claim the interest payments on the mortgage of $104 000 on property one, or will the tax department see that as fraudulent?  I was merely using my redraw as a savings account, but will they view it as – nearly had the mortgage paid off and then suddenly back up again to $104 000?  If this is the case I think they will only let me claim the interest on the $4000 that was the balance before I emptied the redraw account.  

Is anyone able to advise me either way.  I am cutting it quite fine financially, am may have to sell propety one if I can claim the interest rates on the entire mortgage balance.

Cheers and look forward to hearing from any experienced investors or accountants out there.

He did mention that the intention was to add value to the property or something along these lines, and because I made a loss and I'm not continuing with the project, these can be deductible..?

Newbie here so be gentle… I'm looking for advice of my current situation and happy to take on professional advice to realise any long term benefits.

Here is my situation. Many years ago my wife and I bought our first IP, we bought it while in our early 20's whilst still living with family. Standard loan which we paid principal and interest. After a year we converted the loan to a LOC. A couple of years later whilst living in company supplied accommodation (we moved around a lot, project to project) we bought another IP and financed it by increasing the LOC. We have the rent going into the LOC and pay all related costs from the LOC. Very simple to manage and its positively geared. Current LVR is approx 45%.

A couple of years ago we finally settled and bought our first PPOR. We had cash for all costs (stamp duty etc) and 10% of principal. Obviously it would have been preferable to get access to the cash in the IP but not the case. We have been hitting the loan on the PPOR pretty hard and allowed the LOC to now max out.

I'm now getting itchy to buy another IP as we have an LVR in our PPOR of 50% and 45% in the LOC. The the question is do I increase the LOC or do things another way. We'll probably find our selves upgrading the PPOR within 5 years and the ultimate goal is to have a reasonable second income from IPs whilst having the PPOR paid off. (Although I have no need to sell the IP's I'm struggling to comprehend the ramifications of CGT whilst they are linked to one loan (LOC). Makes things messy).

Is there any specific advise people have to not be trapped in an unwanted scenario? at the moment its frustrating paying interest in the PPOR knowing its non tax deductible. But of course we're all the wiser in hind sight.

Thanks in advance. 

Hope somebody can help with this query.

We have an flat in London, with a large amount of equity. At the moment it is on a Capital repayment mortgage and we have to pay tax on the income we earn from it. I was thinking a better option would be to re-mortgage it on an interest only loan and invest the money in a property here in Australia. We would have approx 520 AUD cash to spend on an IP. If I put most of this money in an offset account against an interest only mortgage  then the repayments should be very low and I can claim the tax back on the interest on the mortgage, is this correct?

Also is it possible to put the rent from the property to pay my home loan, without any tax implications? The property in London would be a tax loss and we would have to make up some of the repayments.

any advice is greatly appreciated!

Thanks for the quick responses.

The strategy that I have been taught, through my parents & their accountant, is based on negative gearing & tax minimization. I have implemented this strategy myself and as mentioned in previous post I do have investment homes.

Furthermore, the accountant that i currently use (same accountant as my parents) has always advised against using trusts, and any other different structures. Therefore, my structure…if you can call it that….is very simplistic….my properties are in my wife's name, or my name…..dependent upon what was best at the time to minimize PAYG tax and potential Land tax consequences. 

From reading Steve's book, & personal experience,  I now realize that the strategy I am using is potentially limiting in its nature (& long term based).  I now also realize that their are more effective investment strategies for wealth creation.

My initial goal is to gain a greater understanding of the different strategies that can be used and then review my own situation with an ultimate goal of being able to use passive income from properties to supplement/or potentially replace my work income.

In order to achieve this goals I am very willing to do my own research and learnings, however, at the same time I would like to work with someone, preferably face to face, who can coach and mentor my wife.

Assume I have saved the 10% deposit of a $350000 house. ~ $35000.

The $35000 sits in an offset account against my PPOR.

The bank then puts a freeze on the offset account so I can't reduce the balance below $35000.

The bank creates a loan account for the $35000 that is tax deductible.

The $35000 in the offset still reduces the interest on my PPOR.

Eventually, as the IP goes up in value I can release the $35000 from the offset.

If that's possible, then I'm definitely doing that.