Forums / Getting Technical / Legal & Accounting / Using IP Equity for a PPOR

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  • Profile photo of SofiSofi
    Participant
    @sofi
    Join Date: 2017
    Post Count: 1

    Hi All,
    I’m just wondering if I have this sort of correct:

    We are looking at using our IP equity (roughly 50k) to put towards our first PPOR.

    If we do this –
    We split the loan into equity and IP – so the interest is still deductible and there’s no confusion between equity and IP loan amounts.

    But does anyone know how this would affect CGT in the future? IP has been held for 4 years, so subject to CGT at 50% off.

    Thanks.

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,190

    Split the IP loan into 2, with the original loan interest being deductible and the new portion not.

    Loans generally don’t effect CGT. The interest on the loan for the PPOR won’t form part of the cost base of the IP even if the IP is used as security for the loan.

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

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

    Profile photo of Corey BattCorey Batt
    Participant
    @cjaysa
    Join Date: 2012
    Post Count: 1,010

    Nice and simple, as Terry has noted just keep the loan into two portions – so you can clearly define what is investment vs non investment use.

    Borrowing against the IP security won’t play into the CGT considerations.

    Corey Batt | Precision Funding
    http://www.precisionfunding.com.au
    Email Me | Phone Me

    Investment Focused Finance Strategist - servicing Australia-wide

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