All Topics / Legal & Accounting / Upgrading our PPOR but wanting to keep and Rent it out

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  • Profile photo of travisrobinsontravisrobinson
    Join Date: 2021
    Post Count: 0

    Apologies if this is already answered someplace else.  Our PPOR will be paid off in the next 12 months and we are wanting to upgrade to accommodate our changing family circumstances.  We are wanting to keep our original property as an investment but acknowledge there is no real tax advantage to this as it will be positively geared.

    I have heard about setting up a Trust structure and having all properties sit in there while renting one back?  Then using the losses from the higher leveraged property to offset the income from the positively geared property?  Thoughts??

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

    That can work out well in limited circumstances, but in these days of low interest rates the trust would soon make a profit on the property that it rents to you and that income would be taxable income where it otherwise wouldn’t had you bought in your own names. Also have to factor in land tax on trusts if buying in NSW and VIC, plus the estate planning aspects.


    Seek legal advice before trying it.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide)

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

    Hi Travis,

    As Terry has pointed out, there are many things to consider in such a move (i.e. keeping the old PPOR as a rental).  For sure it can be done, but is it advantageous to do it?  Or is it more advantageous to sell with NO CGT to pay, so you can put all (or some?) of that freed-up cash down as a deposit on the new home?  Again, there are many things to consider there too (with such low interest as we have today, is it better to own the new one with as little debt as possible, or instead, keep spare cash and take out a larger low-interest loan?).   If you kept the other home, then the extra Income might help to pay for the new one, but (as you say) the borrowing against the old PPOR WON’T be tax-deductible unless the borrowing is for another investment (and a new PPOR doesn’t count).

    Have you been using an Offset account at all?  If not, DO read up on them, as they might help to chart a better path into your future.  In short, you can pay down a mortgage, yet still have it all available if required.  Certainly, it is good that you are asking while there is time to formulate a plan.  Keep asking questions around this subject, read up more, meet with your adviser(s), then come back with more thoughts/questions for us.   By putting your back to the wheel now, you can surely find the best way forward FOR YOU !!  And welcome aboard, too,


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