Hey there,
Been a while since I have posted…
My family situation is changing and our PPOR is no longer going to suit our family.
My ideal goal is to turn the PPOR into an IP, and buy a new PPOR.
I'd like to hear from others who have done the same thing please.
A few preliminary questions:
* How do I extract our equity out of the PPOR in the most suitable fashion? (purchased in joint husband and wife's name)
* Any traps I need to be aware of?
* How do I make most of the debt associated with current PPOR (future IP) tax deductible?We appreciate the advice in advance,
QL
Quantum Leap wrote:Hey there,My family situation is changing and our PPOR is no longer going to suit our family.
Sorry to hear that.
I am not in this situation but hear goes !Quantum Leap wrote:My ideal goal is to turn the PPOR into an IP, and buy a new PPOR.I'd like to hear from who have done the same thing please.
A few preliminary questions:
* How do I extract our equity out of the PPOR in the most suitable fashion? (purchased in joint husband and wife's name)
One joint owner transfers ownership to the other person. Like selling half the property
or
You sell PPOR pay off remaining debt and take left over cash as deposit for new ppor.
(
this next method depends on if you are requiring support from centrelink)
Scenario
you keep PPOR and turn it into IP
Centrelink then deems negative gearing as income and reduces your parenting and family A and family B payments
Centrelink also Deems you to have an asset and reduces your payments.
You take out a line of credit loan but it is dangerous to other half owner against old PPOR for new PPOR. THis new loan is not claimable as private purpose.
Get the old PPOR valued as soon as you change its status to IP. For future CGT implications you need the value when you changed to IP.Quantum Leap wrote:* How do I make most of the debt associated with current PPOR (future IP) tax deductible?
Earn more money
or
Pay off the debt as fast as Possible for IP
Why ?
Because negative gearing is not as tax deductible as you might think.
if you earn from $34000 to $80,000 you get 30% of the negative gearing. So you lose 70%
You may be able to claim the building costs as depreciation if it is a relatively new property but it increases capital gains tax each year you claim by reducing your cost base.Thanks Duckster,
Last few weeks have been hectic therefore the late reply.
Really appreciate your response.
I should have said that the family is INCREASING in size, so it's actually a good thing!
Rgs
QL
Depending on the numbers you may even want to consider selling the property into Trust and borrowing 100% of the valuation.
This way the entire interest on the new investment loan becomes Tax deductible and the balance less the amount currently owing under the current mortgage can be used as deposit on your new PPOR.
Of course there are a couple of consideration including your marginal Tax rates, the current loan amount and valuation as well as the potential Land Tax.
In saying all of this we have done this for dozens of clients over the years and it can work out very effectively.
Richard Taylor | Australia's leading private lender
Hi,
I dont know if you have already worked out your situation. I had a friend of mine who had a similar situation. The best way they approached the issue was transferring the property in Husband name.
This is how they worked out their situtation.
They had already paid off more of their PPOR house (roughly about 20 k left) in the loan
The property which was in joint name was gifted by the wife to husband to avoid stamp duty.
They converted the PPOR to investment property and moved into another property (which was an investment property earlier) to PPOR. They took 100 % loan on their first PPOR (which has been converted to Investment Prop now) and paid off the new PPOR property. So this would help with their negative gearing as well when they give the first house for rent
But i believe it is very difficult to convery a PPOR to IP without the help of finance brokers. They may help in making the process simple.
Good luck.
Thank you again for your replies I really appreciate them. Providing me exactly what I need…
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