Claiming Interest on Loan

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prodontia
Member
@prodontia
Join Date: 2004
Post Count: 4
April 9, 2007 - 3:17 am
Hi there, sorry if this has been covered elsewhere.
I currently own my principle place of residence (an apartment – no mortgage on it).
We are currently going to purchase another property (landed) and make that our principle place of residence (we will have to take out a loan for that), and will use the property we currently live in as a investment property.
1. Is there anyway to structure the loan in such a way that the interest from the loan can be tax deductible?
2. What it the current legislation regarding avoiding the CGT on the apartment?
Thanks for all your help and clarification
Adrian
duckster
Participant
@duckster
Join Date: 2004
Post Count: 1,674
April 9, 2007 - 4:08 am
Is there anyway to structure the loan in such a way that the interest from the loan can be tax deductible?
http://www.ato.gov.au/content/downloads/NAT1729-06.pdf
See page 10 last paragraph starts with the words Some rental property owners borrow money to buy a new home and rent out their previous home
It is not allowed tax department will not allow it !
Loan must be directly related to the purpose of producing income to be deductible.
CGT exemption on PPOR see link below . .If you have never rented out apartment and has always been PPOR it is CGT exempt.
http://www.ato.gov.au/individuals/content.asp?doc=/content/36887.htm
AmandaBS
Participant
@amandabs
Join Date: 2005
Post Count: 549
April 9, 2007 - 7:57 am
Yes I agree with Duxster it is how the funds are used and not what property is mortgaged that is relevant. Probably the only other way would be to sell it to a Family Trust, but you'd have to pay stamp duty then, so you're caught both ways.
Being your PPOR though there would be no CGT if you sold it now, and rented while the other place is being built.
Richard Taylor
Participant
@qlds007
Join Date: 2003
Post Count: 12,024
April 9, 2007 - 8:58 am
Depending on the actual numbers selling the property into Trust could be well worth it.
I recon at the moment we do about 1 of these type of deals a week where a client realises they probably have structured their original PPOR loan incorrectly and need to restructure to obtain a tax deduction on the interest.
Richard Taylor | Australia's leading private lender