This is all hypothetical as I don't own any property. but lets just say.. that i own an IP and a PPOR. I have lots of equity in my IP and not much in my PPOR, which means that i have a huge interest on my PPOR and yes probably CF+ on my IP.
Ok so if I refinance on my IP to fund more into my PPOR its practically useless as the refinanced is still not tax deductable.(im after tax deductables here).
So to make the refinance tax deductable, i can leave my PPOR and rent it out for a while(i dont know how long,does it matter?) and rent somewhere else. I then refinance my IP(original one) and transfer that money over to my PPOR(now turned IP) which as they are all IPs does that make the refinanced bit tax deductable. Then with the lots of equity on my PPOR(turned IP) I can turn it back into my PPOR and have more equity and thus less interest and have more interest on my IP but it all being tax deductable????what does everyone think of this??? does it work???? is it good?? what about timeframes like leaving PPOR for????
My silly schemes have come back.
Chris.
The ATO will still look at the purpose of the funds. You have increased one loan to pay down another, so the end result is the same. Nothing will have changed.
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
Yes but when you change the IP back to the PPOR you will have a low undeductable loan and a big tax-deductable loan(in the IP that you redrew from).
Chris.
You can leave your PPoR for up to 6 years before you will be liable for C.G.T on it if you ever sell.
The good news is that while your PPoR is an I.P you can claim all the associated holding costs and any loan interest.
It would probably be better form you to move out of your PPoR and rent somewhere yourself, and keep the two existing properties both as I.P's.
Rental living is cheaper than home owning in most cases; especially when you consider the tax deductions you will get from the two I.P's.
As Terry says; the purpose of the loan is what the A.T.O looks at and you are simply moving the money from one place to another. The overall debt on the two I.P's is the same no matter which property it is assigned to. It's a waste of time and will cost money.
I would be doing the above, and pouring all the excess cash from the the difference between what your rent will be that you have to pay and what your mortgage would be if you were still living in your PPoR and not getting any tax deductions, and also pouring all tax return money back into the PPoR mortgage as well to reduce the debt.
After 6 years of renting somewhere else you should have put an enormous hole in the PPoR mortgage, you can move back in and have a fairly low PPoR mortgage and lots of equity and you can invest again.
Or, why not keep renting nice houses forever and keep on buying more I.P's?
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