Ok so me and my partner are going to be moving from Brisbane to Mackay early next year, and we will be renting our house out in brisbane which is currently our PPOR. We will be renting a house in Mackay for at least 12 months. Now how should our loan for this be set up to maximise our tax. and any other tips that you may have would be much appreciated.
Hi Legend
Do you plan on moving back into this property?
Do you have any other debt? Car loan, personal loan, etc?
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
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At this stage we do not have any plans to move back in but you never know what might happe
We have a couple of other loans as well but hopefully these will be gone before we move. One is split off the home loan and the other is a seperate loan for some land.
Ok as this seems to be a bit of a favourite topic that i have seen while doing some searches. What i have come up with so far is
1 talk to an account
2 we should get our loan change from a redraw to offset ?
3 we should look at selling the house before 6 years ?what else should we be looking at
You should not be paying off the house but keeping your cash for future possible PPOR loans. A good way to do this to save interest is to use a 100% offset. Paying into the loan and redrawing will make you pay more tax so don”t do that.
No need to worry about selling yet.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
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What are your plans when you move to Mackay for work?
What amount of rent are you expecting on your Brisbane property?
What type of property are you requiring & expecting to pay for rent?
Lefty
This is always more complex than you realise, especially if you’re not sure whether you’re going to move back in or not.
First of all, you need to speak with an accountant to find out the tax implications. There WILL be some!
You will most probably need to get your house valued as well, as the value the house holds will become important (for calculating GST) if you ever sell it.
Your accountant will also tell you how to arrange your loans so that you can claim tax deductions on the borrowings that are being used for investment purposes. Without diligently setting up your finances, you could be in for a big hit, tax-wise.
Finally, make sure your accountant is an expert with property – not all accountants are the same!Good luck!
Cheers,
Denthanks for the replies.
We will be looking to get around $400 a week for our house in brisbane and looking to spens no more than $500 week on rent in mackay. We will be renting house for a minimum of 12months with the plan to buy another ppor house in mackay. At this stage we are not planning to move back to brisbane.
Not sure if it is going to cause any problems but work will be paying me a LAFHA for 12 months to assit with the cost of rent and food. Basically it reduces the amount of tax i pay and i get an extra $16000 tax free. But as soon as i buy another ppor up there my LAFHA stops.
so what i need to be doing is
1. talk to an account that knows about property tax
2. talk to my mortgage broker about changing my loan to IO with offset account before changing PPOR to IP
3. have PPOR valued for tax purpose
4. get a deprication schedule doneIs there anything else we should be looking at?
With an offset account attached to the IP what are you allowed and not allowed to do with the money in the offset account. I know the purpose of the offset account is so you do not contaminate the loan. but can i put money into the offset account and take it out of the offset account as i need.
i see people talking about having split loans on here what is the benifit of having a split loan or a loan with an offset account or is this the same thing?
No benefit in having a split loan unless u wish to borrow for something extra .
The idea is to stop paying the loan down, but still geting the benefits of you cash holdings, hence the 100% offset.
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
Terryw wrote:You should not be paying off the house but keeping your cash for future possible PPOR loans. A good way to do this to save interest is to use a 100% offset. Paying into the loan and redrawing will make you pay more tax so don''t do that. No need to worry about selling yet.Why does it matter?The loan from the PPOR is not tax deductable anyway, I dont get why putting it in an offset benefits them.
If it is their PPOR, after 6 years they will not be able to able to claim deductions anyway. Say in 7 years time they want to buy an investment property, they can take out a new loan with an offset account and then redraw on the PPOR loan and put it into the the new investment property loans offset account. The PPOR place is not tax deductible anyway so drawing money out has no impact because it never was tax deductable anyway.I dont get why it matters so much? Or does it matter if they decide the PPOR might actually be used as their IP?
From what i have read so far it does not matter with your PPOR but if you want to turn your PPOR into an IP you need to have your loan on interest only and have a 100% offset account so that you do not contaminate the IP loan so you can claim more against you tax.
This person is going to be renting their PPOR out. So the loan interest will be deductible. Even if they move back in after 5 years they could deduct the interest during this time.
It is best not to pay down the loan in case they want to buy somewhere else. If they had paid down this PPOR loan (now investment) by $100,000 and had no cash available for the new house they would be in trouble. They would have to reborrow $100,000 from the old house loan and use for deposit etc. The interest on $100,000 would be $7000 pa. This would not be deductible because it is being borrowed for private purposes (even if taken from redraw = new borrowings).
Whereas if they had placed this $100,000 in an offset account they would still have saved the same interest, but when they buy the new house they just use the offset account cash. As this is cash there is no new borrowings. When they take the cash out of the offset the interest on their old PPOR loan goes up by $7,000. Because this loan is now for an investment property the whole interest on this $100,000 is now deductible. Net result is $7,000 extra in tax deductions = possibly $3,000 pa in savings.
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
Yeh but if they buy a new IP they can just take out a new loan to finance the new IP and redraw from loan on PPOR and put in new investment propertys offset.
ledgend80 wrote:From what i have read so far it does not matter with your PPOR but if you want to turn your PPOR into an IP you need to have your loan on interest only and have a 100% offset account so that you do not contaminate the IP loan so you can claim more against you tax.Yeh but if they pay down their PPOR loan they can take out a new IP loan when they decide to buy the IP. I think the only disadvantage is if they want to buy something like a car with cash in between. Drawing out to buy something else will mean they wont get the tax deductability but if they dont intend to do that and want to buy an IP down the track they can just get a new loan.
propertyboy wrote:Yeh but if they buy a new IP they can just take out a new loan to finance the new IP and redraw from loan on PPOR and put in new investment propertys offset.How would that be better? They would be borrowing to invest in an offset account.
Also it is a big IF. Using my strategy will not cost any more in terms of interest etc and will have a much better result.
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
propertyboy wrote:ledgend80 wrote:From what i have read so far it does not matter with your PPOR but if you want to turn your PPOR into an IP you need to have your loan on interest only and have a 100% offset account so that you do not contaminate the IP loan so you can claim more against you tax.Yeh but if they pay down their PPOR loan they can take out a new IP loan when they decide to buy the IP. I think the only disadvantage is if they want to buy something like a car with cash in between. Drawing out to buy something else will mean they wont get the tax deductability but if they dont intend to do that and want to buy an IP down the track they can just get a new loan.
The future doesn’t pan out as expected. You may think you won’t need access to your cash now, but in 5 years what if you did want to buy a new car?
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
Thats the scenario I am in and the bank is not offering me an offset account so I am thinking of just doing that. If I dont intend to draw on the amount I pay down the loan, does it make a difference?
Terryw wrote:propertyboy wrote:ledgend80 wrote:From what i have read so far it does not matter with your PPOR but if you want to turn your PPOR into an IP you need to have your loan on interest only and have a 100% offset account so that you do not contaminate the IP loan so you can claim more against you tax.Yeh but if they pay down their PPOR loan they can take out a new IP loan when they decide to buy the IP. I think the only disadvantage is if they want to buy something like a car with cash in between. Drawing out to buy something else will mean they wont get the tax deductability but if they dont intend to do that and want to buy an IP down the track they can just get a new loan.
The future doesn't pan out as expected. You may think you won't need access to your cash now, but in 5 years what if you did want to buy a new car?
I understand, but could you just not refinance whole amount to an offset account loan 5 years down the track? Are there any implications from a tax perspective only in doing this? (I understand theres refinance risk, bank appetite etc etc).
propertyboy wrote:Thats the scenario I am in and the bank is not offering me an offset account so I am thinking of just doing that. If I dont intend to draw on the amount I pay down the loan, does it make a difference?Just change banks.
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
propertyboy wrote:Terryw wrote:propertyboy wrote:ledgend80 wrote:From what i have read so far it does not matter with your PPOR but if you want to turn your PPOR into an IP you need to have your loan on interest only and have a 100% offset account so that you do not contaminate the IP loan so you can claim more against you tax.Yeh but if they pay down their PPOR loan they can take out a new IP loan when they decide to buy the IP. I think the only disadvantage is if they want to buy something like a car with cash in between. Drawing out to buy something else will mean they wont get the tax deductability but if they dont intend to do that and want to buy an IP down the track they can just get a new loan.
The future doesn't pan out as expected. You may think you won't need access to your cash now, but in 5 years what if you did want to buy a new car?
I understand, but could you just not refinance whole amount to an offset account loan 5 years down the track? Are there any implications from a tax perspective only in doing this? (I understand theres refinance risk, bank appetite etc etc).
Refinancing to an offset would mean borrowing money to place in the offset. There is no return on this so the interest on this portion 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
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