The interest on the $265,000 loan will not be deductible. But it may still be worth doing, but make sure this loan is a separate split. so you don't contaminate the existing loan on the property. $175,000 loan should be deductible.

You cannot use the main residence CGT exemption because you will be claiming the new house (or claim old house and not knew house).

If your house is in VIC you may be able to buy the house off your wife with no stamp duty and borrow the lot. This will create a large deductible loan with a large cash deposit for the new house. Will save you heaps potentially.
But watch out for asset protection and estate planning issues.

Good news Paul

ps when are you coming to Sydney again?

if they don't defend it in court, then could be quick. file a statement of claim, wait 28 days get a judgment and then try to get the money – but then they may apply to set aside the judgment. Or more likely, they will just pay.

Of once they are served court judgments they will just probably pay. If they want to fight it then maybe 6 to 12 months.

Harry,

Good in theory again, but very hard to implement. Why would a partner take all the risk and give you a bit of the profit?

You could use a unit trust (to take part of the risk) and protection your ownership position. But there are many things to cover.

IO will usually automatically revert to PI at the end of the IO term.

You can then, or before, approach the bank and ask them to extend the IO term.

Gluttons for continuing education points too.

hi Richard,

Good question. I am working with structuring and setting up estate plans for people and loans are a big part. There are so many silly brokers out there and so many people are simply throwing their money away by paying too much tax because they haven't got a simple part of it correct. Now I can give tax advice and legal advice and credit advice and SMSF advice, but will leave out the financial advice for now.

Carl, you are throwing money away!

heaps of issues with smsf. You would be unable to stay in it if you purchase in the SMSF. You would also likely to have problems building.

Since you will be owner building and have a bit of equity you might consider buying the land with an 80% LVR loan and then setting up a LOC on the PPOR and using this to complete the build. Once the project is finished yo may be able to increase the loan on it for further investing.

Yes, def don't use a LOC for a standard loan because of the tax issues. If you do you will be left wtih a large loan with none of the interest deductible. Only use a LOC for deposits and other IP costs.