Advice sought-convert PPOR to IP

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iwsctws
Member
@iwsctws
Join Date: 2004
Post Count: 33
September 10, 2005 - 2:02 am
Dear Forumites,
For work reasons, our family has to move to another state and our PPOR will become an IP. Our plan is to rent the PPOR and then buy another IP in the new state (while renting one to stay). We are in a confused state as we are not financial savvy or tax structure savvy. Would appreciate some help.
Our situation is:
House valued 700K
Original loan 560K
Present loan 440K
Questions:
a) should we “top” the loan back up to 560K (at present is with ANZ with a redraw) to maximise tax deductions ? we are hoping to refinance to an offset in order to achieve that.Then draw out 120K as deposit for new IP.(560K-440K)
b) or just leave the loan as it is and draw out 120K for new IP?
Which will ne a better structure for tax purposes? (i should add that i anticpate the PPOR to be more negatively geared than IP; also the PPOR is in both my husband and my name; he’s on the highest tax rate and i am not working; the new IP in the new state would be in hubby’s name)
Apologies for the long and tenous question. I hope someone would be able to englighten us.
Cheers
lee
zenq
Member
@zenq
Join Date: 2005
Post Count: 26
September 22, 2005 - 2:44 am
One thought: you can keep this as your PPOR for 6 years after moving out if you wish: ideal if you want to sell it after a few years without paying CGT. Can’t neg gear it as well though. If you move back in within 6 years, it stays as your PPOG, and the 6 years starts again when you move out again.
“If you look long enough into the void the void begins to look back through you.” Nietzsche
Mortgage Hunter
Participant
@mortgage-hunter
Join Date: 2003
Post Count: 3,781
September 22, 2005 - 3:37 am
You can leave your home and claim it as your PPOR with a CGT exemption for 6 years. You can neg gear it during this time.
You can top the loan up but it is the purpose these funds are used for that determines deductible interest or not.
I suggest that with your plan you move and buy your next IP – draw the funds as described for a deposit and costs then borrow the rest using the new IP as security.
I hope these make sense. Obviously you are going to receive conflicting advice from all sources inc here (in fact you just have) so make sure you seek a professionals opinion!
All the best
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985
Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.