Goos day all…
Almost a year ago I borrowed against the equity in my then PPOR to purchase my new PPOR. The old PPOR is now being rented out for less than the mortage.
I have been advised that the interest on the loan secured against the now IP is NOT deducable because the loan was used forn private purposes (to purchase my new PPOR).
So… what do I have to do to get an interest deduction against the IP?
Hi papaung
Welcome to the forum.
When you originally accessed equity, did you set up a second loan or did you simply extend the original loan to a higher limit?
If you set up a second loan as the deposit for your new PPOR, that loan won't be deductible but the original loan will be.
Basically, you should be able to claim whatever the loan amount was before you accessed equity.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
You cannot change a purpose after it has happened.
Ideally you would have used a 100% offset account and IO loan when purchasing the old PPOR and this would have saved you thousands in tax when you purchased the new one.
To fix/improve things now you could sell the old PPOR or if jointly owned sell/buy the other half and borrow to do so. CGT may be minimal but stamp duty could apply. If the property is in VIC you could be in luck.
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
Thank you for your response.
Jamie :When you originally accessed equity, did you set up a second loan or did you simply extend the original loan to a higher limit?
Not a new loan, we extended the loan to 80%LVR on the old PPOR. Then we did a transfer to the new loan on the new PPOR via the offset account, effectively reducing the loan on the new PPOR.
Terrw: Ideally you would have used a 100% offset account and IO loan when purchasing the old PPOR and this would have saved you thousands in tax when you purchased the new one.
I do not understand how this would have saved me thousands. Sorry, please explain, bit of a novice.Terryw: To fix/improve things now you could sell the old PPOR or if jointly owned sell/buy the other half and borrow to do so. CGT may be minimal but stamp duty could apply.
Can we sell to each other? Eating the transfer duty and loan fees, which would be deducible…right???
Many thanks
If you ha used a IO loan with 100% offset you could have saved the same interest but had your cash available for the new purchase. This would mean the old loan would have a high balance so more deductions.
You could sell to each other, but would have to sell a half share to one and then the one coul sell a half share to the other. If the property is in VIC you could save heaps on stamp duty.
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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