Hi all,
I currently own an investment property (house) in Hurstville South which is worth approximatley $430K. I have a line of credit of $300K and now currently at $260K.
I am now considering buying a unit to live in in either Ramsgate/Monterey/Dolls Point for approximately $330K. I plan to use the $40K from my line of credit as a deposit.
What I want to do is use my equity in the investment property to add to the deposit. Thus I will increase the loan to 80% of $430K ie $340K giving me an extra $40K to throw onto my deposit on my intended place of residence.
The advantage being that I have transferred as much of my debt inot my investment propoerty for taxation purposes.
Is this legal tax reduction? Is there a better way?
Hi pman
Nice try but regretfully not.
The ATO will apply the “purpose test” of the funds and if this is used to purchase a PPOR then they will disallow the interest claim.
You could always consider selling the IP to a HDT with you as the Trustee and then use the funds that you raise less the amount of the existing IP loan as deposit.
Only downside is that stamp duty is still payable on the new transfer and possibly CGT dependant on the Transfer value. In saying this i have many clients doing this as the interest savings is considerable depending on how long you intend to live in the property and you current Tax Bracket.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
New 100% Shared Equity scheme coming soon – Email us for details.Richard Taylor | Australia's leading private lender
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