Hi all,
I hope you can help me with this.
My situation:
I have three properties:
1) Primary residence – no mortgage
2) Investment Property – bought for about 180k, currently rented for 220/wk – mortgage of 170k
3) Just bought another property, want to move to this property —there will be lots of mortgage on this oneWhat will be the best structure for my wife and I?
My understanding is we can move to te new property and rented out out current primary residence for a period of up to 6 years – and still claim that the current primary residence as primary residence (so that if we sell it within 6 years we can get CGT exemption).
If the above is true, can we say that the new propery that we bought is for investment and claim tax benefit from loan interest, even though we don't rent it.
The other thing is if we can't do the above, what is our alternative?
If we make this new property our pimary residence, considering that our current primary residence has no mortgage, it means that we can't claim any interests… And considering that we will have lots of interest in the new loan, we just don't think it is fair…
Should we sell our primary residence, and try to find a new investment property?
We actually want to hold this until the market is better.
Really thank you for your input.
If you move into the new property then the interest on the loan is not deductible. If the new house is not your PPOR then it will be subject to CGT as you cannot have 2 ppor simultaneously. Consider the possibility that the new house is your ppor and pay cgt on your current house for the portion of the time that it was an IP (since moving into the new house) this may require you to get a val at the time you move out and commence using it as an IP.
"If the above is true, can we say that the new property that we bought is for investment and claim tax benefit from loan interest, even though we don't rent it."
If the property that has the loan against it is not rented then the loan interest is not tax deductible.options – stay in original primary residence. Why do you want to not live in it?
-rent out third property. Claim interest costs -rent helps pay off the interest costs.
You have to think like an investor rather than as a home owner
The rent helps cover the interest costs sit down and go over the figures of what it will realy cost you by the formula
income = rent – insurance – interest – council rates – water rates – repair costs.Following on from what Scott mentioned you could always look to sell your current PPOR into a Trust structure with you as the Unit holders. Look to borrow 100% of the current market valuation and the entire amount of the new loan to the Trust will be deductible.
Admitedly you will incur Stamp Duty on the Transfer but the depending on your individual Tax rates the exercise could still be well worth it. Especially if you intend to retain the current PPOR long term as an IP to build your portfolio.
Richard Taylor | Australia's leading private lender
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