HI, I AM NEW TO THIS FORUM.
WE HAVE LIVED IN OUR CURRENT HOUSE FOR 3YEARS WHICH WAS INITAILLY WORTH 300,000.
NOW WE RE-FINANCED THE HOUSE AND IT IS WORTH 400,000. WE BORROWED THE EXTRA EQUITY IN OUR HOUSE AND USED THE MONEY TO BUY LAND WHERE WE ARE GOING TO BUILD AND WILL MOVE INTO THAT HOUSE IN NEXT 12MONTHS.
THEN OUR CURRENT PPR WILL CHANGE INTO AN IP.
PLEASE ADVISE WHAT THE BEST STRATEGY WOULD BE. ALSO I GUESS THE INTEREST AGAINST ALL THE BORROWED AMOUNT OF 340,000 WILL BE TAX DEDUCTIBLE ONCE WE MOVE INTO OUR BUILT HOME AND THE CURRENT PPR IT CHANGES INTO AN IP.
YOUR ADVISE WOULD BE MUCH APPRECIATED.
KAPSWe did just what you have done.
Lived in a flat, renovated it , remortaged and then moved out and rented it. It wasn't a deliberate policy, but came about due to an unexpected relocaction interstate. However, we just rented the place out and claimed the Interest portion of the mortgage as expenses..
One tip.(that caught me out.) When you move out get your property valued. If you claim another place as your PPOR and this one becomes an IP then when you eventually sell the capital gains will be based on the value when it baecame an IP.
thanks ryder
i just wanted to check one point: i have heard from people that if you re-finance you existing PPR and use the funds to buy another property which would eventually become your PPOR, one cannot claim tax deduction for the interest charges for the amount. any thoughts?
also what is the best type of loan for converting the existing PPOR into IP.
Thanks,Kaps
Regretfully you are correct you cannot claim a tax deduction on the funds raised to purchase your new block of land irrespective of the security used to finance the land.
I would strongly suggest that you get your mortgage broker to split the loans as otherwise it will become an accounting nightmare trying to apportion the interest between the 2 loans.
Richard Taylor | Australia's leading private lender
I will be moving out of my current PPOR and into my new house at the end of the year.
Old House = OH
New House = NHThe question are'
1. Can I choose either my OH or NH as my PPOR or IP to the ATO?
2. Can I declare my OH as my PPOR and my NH as my IP even though I will be living in the NH and renting out the OH?Because I used equity in the OH to semi fund the NH if I declare the OH as my IP I can only claim the interest that was originally on the mortgage.
The NH will have a larger mortgage than the OH therefore I can claim greater interest and as the NH is new I could also claim depreciation benefits. The other issue is that the OH will always have a greater capital gain than the NH because of its location therefore I need to minimise capital gains if I were to sell the OH at some point.
what do you think?
Hi
You can't claim the new house is an investment if you are living in it.
If your old house is rented out, the interest on the loan used to purchase this house should be deductible. If you are living in the new place, then you won't be able to claim the interest on the extra bit used to purchase this as it is a private expense.
If the old house has the best CG prospects, you may be able to take advantage of the 6 year rule – which would enable you to claim this as your main residence. This could be CGT exempt for up to 6 years. But you can only have one main residence (per couple or individual). Just wait 5 years and work out which has had the biggest gain. If it is the old house and you don't want to sell you could move in again for 6 months and out again and the 6 years would start again.
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
You must be logged in to reply to this topic. If you don't have an account, you can register here.
