Claiming interest on PPoR turned IP

Thanks Richard,

Here is some more detail;
Existing loan on PPoR is interest only Westpac Equity Access loan with max $265K and sitting near that level. Once the PPoR becomes an IP, can I claim interest on the full balance from the time it becomes an IP regardless of how that balance was achieved up to that point. If not how can one determine which portion of the balance has claimable interest given our use of the loan as a transaction acc.?
Construction loan will be a separate, interest only loan (Westpac again) approved up to $250K.
I’m aware that once the PPoR becomes an IP then CGT comes into play from that date. Are there any other CGT implications? We plan to live in the new house for at least a year.
With an offset acc. against an IP interest only loan, is the idea that all rental payments plus extra (to cover interest or for rates/maintenance etc) are paid into the offset and then only the exact interest amount transferred onto the loan?

Sorry, so many questions. This is my first foray into all this and just when you think you have a handle on things………..

Cheers,

David Coffey

So if I set up an offset loan like this, I’m assuming that I still need make transfers onto the loan to cover interest? If so I’m assuming that I just need to make sure I at least cover the interest amount, or can the interest be charged directly to the offset acc?

Also, I’m pretty sure the ‘Equity Access’ loan we have at present is interest only. There are no required repyments, only the approved limit that we cannot exceed.

When you say “try to claim interest on the balance”, is this a matter of having a sort of ‘clean slate’ once the PPoR becomes an IP. If this is the case, and I say this only int the interest of understanding the situation, would it not be technically advantageous to run this laon up to the max limit (which it pretty much is anyway) before it changes to an IP thus maximizing claimable interest? I reiterate that I ask this question only to gain a clearer understanding of the technicalities of the situation.

Lastly, how to best ensure the existing and new construction loan are not Xcollateralized? I’m pretty sure theyre not given that the Equity Access loan we have now leaves virtually no usable equity anyway.

Thanks for all your help. You guys are very generous with your time and it is much appreciated.

Cheers,

David

Thanks Richard,

The Equity Access loan refinanced our initial P&I loan (with another lender) based on a revised PPoR valuation. We have since taken this loan up to it’s limit by using the available funds for renovations plus other personal expenses including bills etc.

I’m still not sure where this leaves us in terms of claiming interest once this prop. becomes an IP given that some of the loan total comes from personal stuff not related to the property. Does it not matter as it was spent before the property became an IP?

Cheers,

David Coffey