All Topics / Legal & Accounting / Pro's and Con's of turning a PPOR into an IP?

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  • Profile photo of InvestorTOTORInvestorTOTOR
    Participant
    @david-de-mezin
    Join Date: 2014
    Post Count: 16

    Can you please tell me what’s your opinion?

    • This topic was modified 10 years, 4 months ago by Profile photo of InvestorTOTOR InvestorTOTOR.
    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    Hi David

    The biggest negative in my mind is when the principal on the PPOR loan has been paid down to a low amount and the property then gets turned into an IP. At this point, there’s only a small loan to claim a deduction from – and if the person purchases another PPOR, they often have a large non deductible debt set up against it.

    This can be avoided with the right finance structure in place from the start which is IO with an offset. Here’s some more info on the structure from an article I wrote for Australian Property Investor magazine.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of superAndrewsuperAndrew
    Participant
    @superandrew
    Join Date: 2014
    Post Count: 188

    Pros: Interest and expenses will be deductible and it will generate income
    Cons: CGT will only be partially exempt if you decide to sell it in the future

    Cheers
    Andrew

    superAndrew | Property Analyser and Finder Tool
    https://property-analyser.com.au

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    It is possible to avoid CGT totally yet still claim all interest if planned carefully

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of InvestorTOTORInvestorTOTOR
    Participant
    @david-de-mezin
    Join Date: 2014
    Post Count: 16

    Thank you all for your answers.
    The idea behind my question is to be able t buy another PPOR now (I believe that it’s a buyer market at the moment around PERTH) and hold for a a couple of months or year my current PPOR in order to obtain to best selling price possible and generate positive cashflow in between.
    Thank you for your comments

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    In that case both properties could be exempt if you sell the existing one within 6 months of acquiring the new one – seek tax advice as you need to plan.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

Viewing 6 posts - 1 through 6 (of 6 total)

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