All Topics / Help Needed! / where to put profits ???

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  • Profile photo of pasandbecpasandbec
    Join Date: 2005
    Post Count: 122

    Hi there,

    Hoping some of you may be able to help me. It's been awhile since I last posted here. Been busy renovating house and having a baby (hence why this post will probably only be short LOL).

    I have an investment property in Canberra that I'm seriously thinking about selling now that my life has taken a new direction. I don't really want, or have the time, for maintaining an investment property. Also, my priorities have changed now and I would like the security of starting to pay more off our PPOR.

    My question is where should I put the profits of my IP sale? I want to put it against our PPOR but should I pay off the loan directly (and therefore have the money sitting in redraw) or should I restructure our home loan to get the option of an offest account and put the sale profits in there? I understand the differences in doing these two things so don't need an explanation on that, but if our current PPOR was to become an IP down the track, how will things be affected then if we were to put the sale profits onto the loan directly now but redraw it later to buy a new PPOR (therefore turning the existing PPOR into an IP)? Tax wise I mean….. I think I remember from awhile back that doing this might be some sort of tax evasion whereas if the sale profit money was in an offset account it'd be ok??

    Thanks for any/all help.

    Going to try and do another post about CGT now…


    Profile photo of Paul DobsonPaul Dobson
    Join Date: 2003
    Post Count: 1,196

    Hi pasandbec

    Congratulations on the new arrival.  Fantastic :-) While it is very understandable that security is uppermost in your mind at this pretty amazing part of your life, I'd suggest you'll get more long term secutity out of keeping your existing IP than selling it right now.

    My suggestion would be to pass the full management of the IP over to a good property manager and sit back and enjoy this exciting time.  The hardest part of this suggestion will be finding a good PM but, if you ask around, you'll turn one or two up.  Good luck.

    Cheers,  Paul

    Paul Dobson | Vendor Finance Institute
    Email Me | Phone Me

    An alternative way to finance your home.

    Profile photo of elkamelkam
    Join Date: 2006
    Post Count: 722

    Hello pasandbec

    If you do decide to sell then put the profits into an offset account coupled to your PPOR loan, not into the loan itself.

    If you then use the money in the offset account to buy a new PPOR and turn the current PPOR into an IP then all the interest on the loan will be tax deductible.
    If you pay down the loan and then redraw to finance the new PPOR then the interest on the redrawn amount will not be tax deductible as it will have been used for private purposes.

    Hope this helps

    Profile photo of pasandbecpasandbec
    Join Date: 2005
    Post Count: 122

    Thankyou Elka, that is exactly what I needed to know.

    Thankyou also Paul. I'm not sure how much growth is left in my IP. Although it is a fantastic positively geared property, we will also save thousands of dollars of interest on our PPOR.  I'm not sure if I want to return to work either, so selling my IP might give us the affordability for me to stay at home.

    Might look at buying again (a new PPOR) in a few years time….then our current home will become an IP.

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