I am looking at renting out my house of one – two years whilst I move in with friends free of rent just usual household expenses.
I have had the home home loan for two years part fixed and part variable. Will I need to change the loan? I have heard about the law being changed and you now change lenders now without penalty, is this true?
What is land tax and would I be exempt? Can someone explain any tax implications I have to consider. Are there any other implications in my situation also?
Now to my loan, which I can not understand for the life of me.
I have a redraw option on my loan. Previously I was only able to make the min payments $500pw (full payments, not just interest only) and was doing by direct debit out of my separate bank account. Now however I have all my income deposited into the mortgage thus having an available balance in which I pay my expenses. Previously on the statement it would show the payments and everything seamed to be fine. Now it shows the minimal payments coming out per week of the available balance. But also lump sum debits at the end of the month named normal interest ( out of available balance also). The available balance also fluctuates allot sometimes daily I have noticed amounts of up to $300 being deducted from the available balance but this does not show up on the statement and the loan amount has not altered either. Just poof $300 gone just like magic. The lender is unable to explain this. I would not be surprised if it is right if only someone could explain it.
Thank you in advance.
It would be a good idea to change the loan to Interest Only with a 100% offset account. But as you are only going to be absent for 2 years this is not so essential – but still a good idea in general.
Its very unfortunate that you had all income deposited into your loan. The interest on the whole loan will now not be deductible. You would need to work out the deductible component, which would be the balance after all deposits into the loan were made. Interest on the parts withdrawn won't be deductible. Your loan is containinated with part used to purchase the proeprty (which would be the deductible part) and part used for private purposes. Normally it wouldn't matter if you are not claiming anything, but now it does.
Land tax is payable on investment properties (and owner occupied over a certain val). There is usually a tax free threshold. And the tax is only on the land value of your property. So if you only have one property the land tax may not apply. This is a State tax.
There are also CGT consequences. By renting out your home it will no longer be exempt from CGT. BUT, depending on your circumstances you may still be able to claim it as your main residence for up to 6 years and thereby avoid CGT.
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
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