All Topics / Legal & Accounting / Six year rule and loan type

Viewing 7 posts - 1 through 7 (of 7 total)
  • Profile photo of HarryHarry
    Participant
    @amichelia
    Join Date: 2015
    Post Count: 2

    Hi, this is my first question so please patient with me…

    I purchased my property with a residential home loan and lived in it for over 2 years. Then I moved interstate and rented it out. I understand that I can use the 6-year rule to keep this property CGT free. The questions are:
    (1) Do I need to change my home loan to investment loan when I start to rent it out? (Westpac told me that if I claim interest deduction then it must be investment loan)
    (2) Again, if I move back to my property within six year do I need to change the loan type again? and again if I move away?
    (3) In general who really cares about loan type (residential vs investment) ATO or bank or both?

    Thanks in advance.

    Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,416

    Hi Harry,

    This is what I love about this place – we all get to share the “things that happen to us” and have a laugh. I think I have had my share of “Bank people who really don’t know what they are doing”, but I have also come across some really knowledgable bank staff.

    What can I say – some are way better than others. In your case, I believe you ran into one of the “not so knowledgable” members of a bank’s staff. It happens. That just sounds so WRONG to me, though I can see how point 3 could have some merit – but 1 and 2? Nope !!

    I hope some of the Mortgage Brokers get to share some of the really “interesting, funny, strange” things they encounter from time to time.

    Or, I could be TOTALLY wrong, and everyone can have a laugh at me (gasp!! :o )

    Benny

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    no no and no

    No effect on deductibility of interest.
    Keep on owner occupied to get a better rate.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of HarryHarry
    Participant
    @amichelia
    Join Date: 2015
    Post Count: 2

    Thanks your your replies.

    Yeah I do have a fair share of accountants, financial advisers even ATO staff who gave quite different advice.

    Interestingly enough, the Westpac staff told me that she didn’t know the 6 year rule but was adamant that there is bank’s internal audit which will make sure only investment loan can claim rental deductions.

    I guess there must be something to influence the loan type as if they have no impact on anything, why would people choose investment loan with higher interest rate?

    Cheers.
    Harry

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Best not to ask a bank staff for tax advice – they are not qualified or licensed.

    Banks want you to let them know if you are borrowing for owner occupied or investment so they can charge you accordingly, but this has no impact on whether you can claim deductions or not.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of DeanCollinsDeanCollins
    Participant
    @deancollins
    Join Date: 2015
    Post Count: 376

    So terry, is there no “retribution” if the bank finds out you are lying?

    I agree with you about the tax implications and in the past it didn’t really matter…..but with the spreads due to apra….are you sure you can get away with lying to the bank?

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Obtaining a financial advantage by deception is a crime and a possible retribution. However very unlikely you would be investigated let alone charged for something like this.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

Viewing 7 posts - 1 through 7 (of 7 total)

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