Hi there,
Let's say you are renting a property to live in.
you buy a negative geared invesment property, but keep living in the rental.After 5 years, there is enough equity built up in the investment property, that you can borrow (against that equity) enough $$ to make a deposit on a house, to live in as PPoR.
So the new PPoR has a (say 20%) deposit, whose security is the rental property, and the remaining 80% has security of the new house.
With the loan that is borrowed against the IP equity (to use as deposit on the house), is the interest associated with this loan considered an expense of the IP? or is it considered to be related to the PPoR?
Cheers,
Hugh.two ways to do it.
1. Use the investment property as additional security for the new home and borrow 100% of the new home value
2. Borrow some money from the investment property, such as increasing the loan/redraw/LOC etc and then use this cash for deposit on the new home.
In both cases the money borrowed has been used for private expenses and the interest wouldn't be deductible.
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
Hi Hugh,
Terryw has got it right on the money.
Another way to think about it is "What is the purpose of the money I'm borrowing". If you were borrowing money to invest, then the interest would be tax deductible. However, you are borrowing money for PPoR so it's not tax deductible.
Hope that helps.
Cheers,
Magnet
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