Sufficient way to deduct all the interest on PPOR that becomes an IP?

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Max78
Participant
@linton20001hotmail-com
Join Date: 2015
Post Count: 2
June 25, 2015 - 2:34 pm
The situation: I have a PPOR worth around $700k and an Investment property worth around $380k. The loan on the PPOR is around $370k and $295k on the Investment Property. I am wanting to buy a new PPOR and rent out my current PPOR as an investment property. I would also be selling the current investment property.
The proposal: As there is significant equity in the current PPOR, I want to refinance the property to create a nice, new, clean loan value (at 80% LVR) and put the excess funds after paying out the old loan into my current investment property, reducing the loan from around $295k to around $120k. Then I intend on selling the investment property after a few months, releasing all the equity on the property – around $270k. I would then use this $270k as deposit to buy a new PPOR. Following this, I would then rent out my old PPOR with the entirety of the loan interest being deductible. This would chain of events would take course over a period of around 6-12 months.
My question is: From an ATO perspective, do you think there is a sufficient enough movement of funds from PPOR to investment property then to sale… to ensure that the loan value and subsequent interest on the current refinanced PPOR (that will eventually become an investment property) for all loan interest to be reasonably deducted?
Terryw
Participant
@terryw
Join Date: 2001
Post Count: 16,213
June 25, 2015 - 6:26 pm
certainly not deductible but shuffling money around.
Max possible to claim would be $370k, but could be much less.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Ballerina
Participant
@ballerina
Join Date: 2011
Post Count: 63
June 26, 2015 - 9:12 am
Why would you sell your current investment property, in order to buy a new IP shortly after? That would be lots of money spent on selling/buying costs, and CG tax? You may have your reasons…. Just a thought? If you use your existing equity from current properties to acquire new IP, that part of the loan would be tax deductible. What matters is what have you spent it on, not which property is mortgaged to get hold of the funds.