TR 2000/17W

Income tax: deductions for interest following the Steele decision

http://law.ato.gov.au/atolaw/view.htm?locid=%27TXR/TR200017/NAT/ATO%27&PiT=99991231235958

stamp duty at market rates too.

Making sure that the payments are going to pay the loan on the property will help, but it doesn't cover a situation where there are others with competing interests in the property.

Exchanging contracts does give a buyer an equitable interes in the property, but there could be others with equitable interests too – such as spouses (or even mistresses) under the Family Law Act, creditors etc. There are rules for determining priority – which are complex. But generally first registered takes priority over later, registered over non registered etc.

Having a caveat can help get priorty over similar claims. There is a case, Black v Garnot, where someone exchanged contracts on a property. One the day of settlement the conveyancing solicitor did a title search about 10am, then someone lodged a writ which was recorded about 11am, with settlement due at 2pm. The end result was that the buyer could not register the transfer because someone had lodged a claim before them and therefore took priority. The property was sold and the proceeds used to pay the judgment of the creditor who lodged the writ. If the purchaser had lodged a caveat they would have taken priority – but they didn't. This is why now all solicitors should advise that a caveat be lodged after exchange and before settlement, just in case. Anyway, this just shows what can go wrong.

I am not sure, but maybe a second unregistered mortgage would take priority over someone lodging a caveat, depending on their claim.

I would suggest look at buying the relative out and then set up LOCs on one or both properties. Use these for deposits on the next IP purchase. Always keep a buffer of around 6 months to 12 months repayments available and borrow no more than 80%.

The ATO has released a ruling basically saying borrowing to pay interest is deductible if the original interest is deductible.

It could be a good idea if you still have a non deductible loan as you can free up cash flow to pay down that faster. But you really are only bring forward the deduction – so whether it is good to do will depend on this fin years income and next. If you have a high income this year and expect a low one next then you may get more tax savings by bring it forward.

Sorry, I should have written myrate instead of CBA

Just take a LOC out on the PPOR with CBA.

Use the LOC to pay for the deposit and costs of the new property and borrow the rest from another bank.

Bankwest used to be good for major franchises too.

Matt, they still would class that as owner builder