open mortgage

Definitely don’t close the PPOR loan down – as this is coded as owner occupied for purpose the lender will be giving you the lowest rate compared to investment use loans so it’s best to hold onto that.

Either keep the funds in offset or into the redraw account – be careful however as not all lenders are the same in how they treat fully repaid loans with funds in redraw, some will automtically close the loan, whereas others will let the loan sit active and available to redraw indefinitely. Best to speak to an investment focused broker regarding your situation as this is a prime opportunity to setup the structures correctly before you jump back into investing – if you do it right you can strategically setup cost effective lending and be able to make a purchase as soon as the right opportunity comes up.

Don’t use cash from the offset to directly invest as the resulting interest will not be deductible.

blackhotel wrote:

Terryw wrote:

The property as been a ip for less than 6 years exempting it from CGT

Just out of interest, how does an IP get exempt from CGT if it’s been an IP for less than 6 years? An IP property is never exempt from CGT unless it was your actual home.

Yes that is right. It must have been the main residence first. The op said he lived in it for 9 years prior to renting it out.

Ethan Timor wrote:

Terryw wrote:

blackhotel wrote:

Terryw wrote:

The property as been a ip for less than 6 years exempting it from CGT

Just out of interest, how does an IP get exempt from CGT if it’s been an IP for less than 6 years? An IP property is never exempt from CGT unless it was your actual home.

Yes that is right. It must have been the main residence first. The op said he lived in it for 9 years prior to renting it out.

Doesn’t the rule of 6 years apply only if at the same time the owners don’t nominate another property as their PPOR? 🤔

Yes thats right Ethan. But the election only has to be made in the year of sale of the first of the properties.
So if someone owned 1 Smith Street, lived in it for 5 years and then rented it for 5 years and moved into a newly purchased 2 smith street (so he owned 2 properties for 5 years) then he could decide which of then to class as his main residence if he were to sell either Number 1 or Number 2 in say year 10.

If next door they probably have gone up at a similar rate so he might be better off claiming the number one being sold as he could avoid the CGT. The one being kept would be subject to CGT at a future date – but best to delay the payment of tax to the future. Plus the CGT could be minimsed by the 3rd element cost base expenses.