changing primary place of residence to investment

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Ulicnik
Participant
@petrik6980
Join Date: 2011
Post Count: 1
February 14, 2011 - 4:04 am
Hi,
Im new and would like to ask a question related to changing primary place of residence to investment.
I have a property in Concord NSW that I purchased in 2009 for 480000. It has about 250000 owing on the mortgage which was 376000 (126000 in offset account) when we purchased. The property has a value of about 650000 – 700000 today.
If I was to change this property to an investment can I re-mortgage on the current value i.e. 700000 – 20% to save mortgage insurance so have a loan of 560000 and buy another PPOR and tax deduct the servicing of the new 560000 loan or am I only allowed to tax deduct up to the 376000 value??
Any help on this would be greatly appreciated.
Kind regard
Jamie Moore
Participant
@jamie-m
Join Date: 2010
Post Count: 5,069
February 14, 2011 - 6:21 am
Hi Petrik
Welcome to the forum.
The test that determines whether a loan is tax deductible is “purpose” – what are the funds being borrowed for? If you’re increasing your loan to access a deposit to purchase a PPOR, that increased portion would not be tax deductible.
However, you are in a good situation due to your offset account. You should be able to withdraw those funds, which will boost your loan up to $502k. Once this property becomes an IP, that $502k should be deductible.
I’ll add the usual disclaimer that I’m not an accountant and you should seek specific tax advice.
Hope that helps.
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
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