We are in the process of selling an IP and are wondering if we can use all or any of the profit to pay off our personal mortgage? This will obviuosly benefit us by reducing non tax deductible debt. However we dont want to do anything illegal or make a mess of our accounts for next year! Here are the approximate figures.
Personal Mortgage $90,000
IP Purchase price $225,000
IP Sale price $305,000
Aquisition and sales costs $15,000
Holding Costs $15,000
Any help on this greatly appreciatedThanks
Nothing illegal about paying off the PPoR debt.
Keep in mind that you will probably have some cap gains tax on the profit from the sale, so keep some money aside for that.
If you've had the IP for over 12 months, then you will be up for tax on 50% of the gain, at your personal marginal tax rate.
Talk to your accountant about what tax you might expect to have to pay.
Paying off personal debt sounds like a good idea. You can always reborrow to pay any CGT – though I am not sure of the deductibility of interest on funds used to pay tax debts.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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