Hi All,
I hoping some of you switched on property gurus can help me.
If a PPOR is turned into an IP, I am aware you can’t simply draw equity from the property to use to purchase a new PPOR and claim that equity as a tax deduction.
But I am wondering in which scenarios the use of equity could be claimed as a tax deduction? I will be seeking financial advice but basically i am wondering if the money was used for shares, or other investments how long it needs to be invested before it’s legally able to be moved onto the new PPOR loan?
Thanks!
Hi there
You’re spot on.
If you’re looking to release equity for your new PPOR you’ll need to set up a second loan against the current property and use that to cover the deposit/costs on your next PPOR.
For instance:
Current property (soon to become IP)
Loan 1: Current loan (will become deductible)
Loan 2: Equity release for next PPOR (won’t be deductible)New PPOR
Loan 3: Main loan for new PPOR (deposit comes from loan 2). This won’t be deductible.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]
other investments how long it needs to be invested before it’s legally able to be moved onto the new PPOR loan?
It can never be moved out to the PPOR loan. If you borrow to buy shares and sell those shares the interest on loan loan will no longer 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
Thanks Jamie and Terry
I guess the only benefit of having the equity from our current property used for a deposit would be that it would be an interest only loan.
It’s a tricky one…we were initially thinking of selling our PPOR (in sydney) to buy our new PPOR (also in Sydney). The benefit of this is obviously no CGT and a healthy deposit for our new PPOR. However, the market is so insane that we feel letting go of a property in Sydney would be silly, unless we really had to.
We also have two IP’s, one also in Sydney and another in the Logan area of QLD. We are thinking of selling Logan rather than our PPOR to provide some financial breathing space for ourselves. The performance of this property has left a lot to be desired. I bought both IP’s within a few months of each other, my sydney IP has more than doubled while the logan one is the same as it was when i bought it!
It really is a tricky one and we don’t know whether we would actually be better off keeping our Sydney PPOR or if selling it and using the profit to reduce our new PPOR debt is more beneficial.
Is the Sydney PPOR in both names?
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
Yep. Our PPOR is in both names.
The IP’s are in mine only.
If it wasn’t you one could buy 50% off the other and borrow to do so and claim the interest once rented out – it could be done with no stamp duty. But it may still be worth doing now – one buy the 50% share of the other so they become the sole owner, you just have to pay stamp duty. At least this allows you to increase deductions and keep the property.
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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