Sounds like you don't understand the concept of deductiblity of interest. This is determined on what hte borrowed funds are used for. So if you borrow against your old IP (eg LOC) and use this to pay down the new PPOR loan the purpose of the borrowings would be private and therefore the interest could't be deducted.

If A and B jointly own a property and A buys B's share the interest on a loan for this partial purchase would be deductible, generally, if that property is an investment.

This may entail stamp duty and CGT though. So you have to run the figures and see if the tax savings make it worth paying the stamp duty and CGT.

If your properties are in VIC it could be possible to do with only nominal stamp duty.

You cannot change a purpose after it has happened.

Ideally you would have used a 100% offset account and IO loan when purchasing the old PPOR and this would have saved you thousands in tax when you purchased the new one.

To fix/improve things now you could sell the old PPOR or if jointly owned sell/buy the other half and borrow to do so. CGT may be minimal but stamp duty could apply. If the property is in VIC you could be in luck.

Also, you have to consider the minimum loan sizes. I have seen some SMSF lenders have a min of $200,000

Powers of attorney cease operation at death!

If it was the vendor then how is she going to sign the contract and the transfer?

If someone is taking over the estate, have they been appointed by a court? ie Probate/letters of administration been granted?

If not then they have no legal authority until their appointment. It doesn't matter what the will says because you won't know if it is the last will and is valid until probate/letters of administration.

These things can drag out for many months and even if you do have a valid contract there could be many reasons why the property cannot settle on time – or at all in some instances.

So seek legal advice if this is the case

Death maybe another!!!

A vendor is more likely to die within 90 days then 30 days!

What effect will this have on the sale? any special conditions.

Insanity is another and so is bankruptcy and even divorce – what if the ex mistress lodges a caveat after your exchange?

In my opinion it would be unlikely that interest would be deductible  on any money borrowed and placed into an offset account and then later used for investment.

I am not sure what you can do. but you have to be careful as you could pay the builder a progress payment and then the builder go under without doing the work.

You also have to be careful about supplies taking back goods which they have supplied the builder and they have not received payments for – the supplier will often retain title to goods until they are paid. So they could try to come back and remove hotwater systems etc.

A SMSF cannot purchase from related parties. But one exception is business real property. This is defined to include leasehold property – ie the land with the building as being part of hte land. The SMSF couldn't buy hte building from a related party unless it is attached to the land.

It would likely that the deductibel part of the loan would be much less than $274,000 – even if this was the lowest balance.

This is demonstrated by a quick eg:

$300,000 loan starting balance.
pay down $1,000 per month PI
Interest $500 each month

Month 1
balance is $299,500

Month 2 $299,000

etc

Then after 10 months balance is $295,000.

If you then pay the loan down to $274,000 and then realise your mistake – you may increase teh loan to $295,000 again.

But of this $295,000 you could only attribute $274,000 of it to the purchase of that property. The extra $21,000 redrawn is a new loan. The deductibility of this would depend on the use of this money.

Now you have a mixed purpose loan.
$21,000 used for other expenses
$274,000 used for the purchase of that property

This means that
21,000 / 295,000 = 7.1% other
92.9% for the home portion

—

Now it gets more complicated

Each subsequent repayment must come off the loan and be attributed to each portion in accordance with the percentage of the portions.

So each month you pay $1000
7% must come off the other portion
93% must come off the house portion

Interest of $500 would be added each month and this too must be added to each portion of the loan
7%
93%

—

as you can see as time goes on it gets increasingly complex.

The net effect is that a must lower portion of your loan will be attributable to the purchase of the house and so if this house becomes an investment property you will only be able to claim a lower portion then the $274,000 which was the minimum balance before.

Does this make sense?