I think you have gotten yourself into a big mess unfortunately.

Refinancing won't help you claim any of the interest because the interest will retain the character of the original borrowings.

Everytime you make a deposit to the loan this is a repayment.
Everytime you make a withdrawal from the loan this is new borrowings.

So if you withdraw $100 for groceries the interest on this new $100 loan will not be deductible.

If you are having pays put directly into the loan then this would mean you would be repaying the original loan by this amount with each repayment.

You then take money out, so this will be reborrowings. The end result would be a large loan with none of it attributable to the purchase of the original property and therefore none of it deductible.

Refinancing will fix the problem from now on, but not the previous borrowings.

What you should do is to get the original loan figure and then deduct from this each deposit you made (disregarding the withdraws). This will be the loan amount attributable to the original purchase. And therefore the part of the loan that is deductible.

You should refinance this amount as one split, with an IO loan, and the other portion with a separate split. You can then distinguish the deductible from the non deductible and pay down the non deductible loan first.

its not that hard either!

Yep, thats right.

You might have to amend your tax return if already lodged and you made a mistake.

there are different depreciation rates for different items. The Building depreciation rate is 2.5% per year for 40 years, but this only applies for the building itself and some other items, maybe kitchen etc. The other items, such as fittings and fixtures, carperts, stove, dishwasher etc are depreciated at a higher and faster rate.

In your situation the building cost probably includes a lot of these fixtures. So you should really get a depreciation report done as each item will be listed separately and this will result in higher deductions for you.

Paul,

I've never thought about this before, but what would happen if you had an option exerciseable in 1 year. You included a contract of sale with the terms of the purchase. Assume it is NSW. For a contract to be valid (or enforceable) it has to include searches such as a s149 certificate.These certificates expire, I think it is about  months for a s149.

So what happens? I guess the contract will be valid and binding on the exchange – but the contract would not be entered into until the option is exchanged. But when this happens the certificates would have expired. I suppose the vendor could just order new ones but I am not sure if any problems would arise.

What do you think?

Ps. I was walking through Darling Harbour in Sydney and noticed that one of the large water front restaurants had closed down, suddenly and unexpectedly. I did a search and found a case concerning this in the Supreme Court of NSW.

It appears the person leasing the property had an option to extend the lease another 20 years, but they forgot to give proper notice. The court case was about an email they sent to the landlord where they talked about extending and they argued that this was notice. But the ruling was that it wasn't proper notice because of various reasons – including that they did not word it directly but just mentioned it in passing while writing about other matters.

The tenant had just completed a $1mil renovation about 4 years earlier. Now they dont have a restuarant!

It jsut shows that you must be very careful when dealing in options.

Pick up the phone and call. Its as simple as that.

Valuations cost from $200 to $400 for a residential property, but it may be free if you are on a professional package. Results can be disputed – but this doesn't mean they will change it. What you need to do is to gather evidence on similar properties that have SOLD recently.

Since you have exchanged contracts, then I beleive the control is probably binding on them, the purchaser. You could terminate the contract at any time until the deposit is paid, but they are locked in (NSW contracts anyway). But, they may still be able to exercise their cooling off period rights (unless they have waived this).

Really you cannot assume the sale is 100% until the cooling off perio expires. And actually you should not count on the sale until settlement as this frequently doesn't occur for many a reason (even though it may contractually supposed to).

When you say "our tax returns" who do you mean owes the tax? If it is a company, then who are the directors?

You would need a binding financial agreement (BFA) signed under the Family Law Act (ie a prenup or postnup in this case). This will allow you to decide on the split of the assets without going to court and it should be binding if done properly. You should tax into account any tax due and who will pay for it.

The BFA will allow you to transfer property without stamp duty in most states and also without paying CGT. But the transferee will inherit the tax base of a property they receive so they will take any CGT that the other spouse may have had to pay up to that point.

Thats the legal side, and then there is the practical side. You must change titles and redo loans.

What sorts of current values for property and loans are we looking at? It would be good for you, perhaps, if you could get the property with the DA on it and give the ex the other. Does she have a job, ie could she get a loan on her own?

Oz,

Where are you based? There are a few brokers on this forum.

It doesn't appear that the settlement date has changed. The settlement date was dependent on the date of the plan of sub-division.