Hi all,
Our situation is: my husband and I got married recently, before married, each of us bought one property as the first residential property in QLD. We decide to live in my property after marriage, and put his as investment. His house originally bought at 630k, with 540k' s home loan. And in the past couple of years, he repaid more than the bank required, thus now he had appox. 110k redraw balance in his loan. The loan balance now is approx. 430k.
if we are going to let the property agent to rent his house out, and start to use it as investment property, what do we need to do?
1)is it worth to do a valuation?
2) we are expecting the net gearing of This investment will be negative, thus we want to get more tax benefit from his personal tax return. Therefore the question is the loan principle we can use to claim interest is 540k or 430k? (We can redraw the 110k balance out too pay off my loan which we are living at moment.) does refinance will help?
3) depreciation schedule, how can I get it for this property? Do we have to? If not, what benefit we can get if we get one.
Really appreciate for your valuable advice.
Regards,
Tracy
TT1222 wrote:Our situation is: my husband and I got married recently, before married, each of us bought one property as the first residential property in QLD. We decide to live in my property after marriage, and put his as investment. His house originally bought at 630k, with 540k' s home loan. And in the past couple of years, he repaid more than the bank required, thus now he had appox. 110k redraw balance in his loan. The loan balance now is approx. 430k.if we are going to let the property agent to rent his house out, and start to use it as investment property, what do we need to do?
TT1222 wrote:1)is it worth to do a valuation?You will need a valuation done – while your husband was living in the property it as free from CGT. Now that it will become an investment property it will start to incur CGT from the day it ceases to be 'his' home. The valuation will establish what the property was worth when the CGT clock started ticking.
Note CGT is not as bad as some people make out, particularly if the property is held as investment for more than 12 months.
TT1222 wrote:2) we are expecting the net gearing of This investment will be negative, thus we want to get more tax benefit from his personal tax return. Therefore the question is the loan principle we can use to claim interest is 540k or 430k? (We can redraw the 110k balance out too pay off my loan which we are living at moment.) does refinance will help?Your husband will be eligible to claim the interest on the existing loan balance ($430K) Note it is only the interest that is deductible and not the principle.
You should consider converting hubby's loan to interest only and direct surplus cash into your loan or into an offset account linked to his loan.
TT1222 wrote:3) depreciation schedule, how can I get it for this property? Do we have to? If not, what benefit we can get if we get one.Phone a Quantity Surveyor (Deppro, Depreciator, Washington Brown ) and ask them to complete a depreciation report on your husbands property. The report will outline all of your husband's depreciation claims.
Really appreciate for your reply, Derek.
Can we redraw the 110k from his loan and start claim interest on original loan balance of 530k?
thanks
Hi TT,
My understanding is that you will not be able to claim the interest on the redraw of $110K if the $110K is used to pay down your home loan.
If, however, you were to use that redraw funds to buy other investment properties then interest on the $110K redrawn would be deductible.
Please note I am not an accountant – someone who is will be along shortly to provide a definitive answer.
Thanks Derek.
Tracy
As Derek has mentioned hate to say No you aren't able claim interest on the $110K.
Easy to be wise in hindsight but often best to look at an interest only loan with 100% offset account.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
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