Sell or keep as investment? Dilemma – advice sought please

If the spousal transfer option isn't available then a sale is not a bad thing apart from selling costs.

It means you'll have approx $500K to reduce your new mortgage by. The total savings in non-deductible interest payments will be very significant indeed.

If you wanted to invest in other property post the sale of your previous PPOR you'll be able to leverage off your new home and the much lower LVR you'll now have.

Hi Leo,

You are correct your existing house could be sold CGT free but if you want to rent it out from this point forward there will be partial gains to be paid in the future.  For example if you lived in it as your PP for 10 years and you paid 300k for it and now it is worth $550k then if you sell now you take the $250k prof tax free.  In the instance that oyu decided to keep it and rent it out for say 2 more years and claim as an investment and you sell it after this point for say $600k then you will have to pay CGT on 1/6 of the 300k profit.  Unfortunately it is purely a time based calculation and not based on a valuation at the time that you move out of the property and then commence the use as an investment.  As you can see on the above calc you would pay $50k CGT  just so you can rent your property out for 2 years and possbily make another 50k which defeats the purpose.

You can gear your existing property easily by transferring the equity into your PP (the new home) and then using that homes equity as security for your old house which is now able to be geared 100%

give me a yell if you need some additional advice

Andrew

0439 526 191

Hi Andrew

'''You can gear your existing property easily by transferring the equity into your PP (the new home) and then using that homes equity as security for your old house which is now able to be geared 100%''

but is this useful for tax purpose ?

Mayuran

You are implying there is a benefit to this. I cannot see any tax advantage as the deductibility of borrowings depends on the purpose. The security for the loan is irrelevant.

Being entangled in that kind of situation needs a a weighing scale. You need to carefully think about it; what options should you should choose. But I think, given those circumstances where a large amount of mortgage is involved, it is better to sell the old house. With it, you may have the chance to lessen the burden of your new mortgage.

Hi Leonard

You cannot transfer for love and affection because your wife would not be able to claim any interest unless she borrows to acquire the property for you at market rates. Stamp duty would still be exempt in VIC.

You need to be careful how you do this or it won't be deductible.

You also will probably avoid CGT if this house was your main residence.

If your wife is 100% title owner then she will get 100% of the income.

Since you will have $800k owing on the new main reisdence you would want to sell your share of the house to the wife and for her to borrow to buy it. She can then claim the interest against the income an then this will release funds which can be used to pay down the new main residence loan.

Yes, Part IVA could be an issue, but the ATO has released a publication saying the interest could be deductible ATO ID 2001/79

Noticed Andrew didn't come back to clarify his incorrect comment or indeed provide us with a fascinating link from the ATO website where it was possible.

As Terry mentioned always obtain advice from a Licensed Professional.

Cheers

Yours in Finance