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Question for accountantsCHIS [72 Posts]  We currently own our home and have paid off the mortgage. I would like to use $100K of our equity to use as a deposit for another house. With a growing family, we need to upsize. Our current house would be used as a positive cashflow rental with a $100K 2nd mortgage. Is the rent considered 100% income or can we still claim the interest component of the repayment as a tax deduction? I hadn't considered this a problem but a recent dinner conversation with friends suggested you can't claim for a second mortgage on a property? I hope I worded that properly. I've had a few cans I wish I was smarter Edvico_kvn [22 Posts] Hi Chis, The Tax Legislation looks at the "purpose" of the loan taken out. Because you will be drawing out a loan for the purpose of purchasing your "home" (and not to purchase/renovate an investment property), the interest on this loan wil not be tax deductible. Your rent will be considered income and you will be positively gearing while the interest on your new home loan cannot be deducted. Hope this clarifies your understanding. Kevin Thang| Chartered Accountant & Principal of Edvico Mortgage Solutions | Suite 5, 28 Belmore St Burwood 2134 |   Qlds007 [4220 Posts]  Depending on the numbers might be a case for considering selling your existing PPOR into a Trust structure and borrowing 100% of the current valuation and then using the entire net amount raised for your new PPOR. Because the purpose of the loan is for investment 100% of the interest is deductible. Depending on the purchase price of your new PPOR you may still need to take out a small non deductible mortgage. Whilst Stamp duty would be payable on the Transfer depending on the figures involved could certainly be well worth it. Cheers Yours in Finance CHIS [72 Posts] Edvico_kvn wrote:
Thanks I wish I was smarter CHIS [72 Posts] Qlds007 wrote:
Depending on the numbers might be a case for considering selling your existing PPOR into a Trust structure and borrowing 100% of the current valuation and then using the entire net amount raised for your new PPOR. Outstanding advice. Excellent idea. That keeps the dream alive. I wish I was smarter |
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