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PPOR query

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GR | 09 Sep 2013, 12:59 PM Agree 0
Hi all,

Plenty of these queries....

I am living in an apartment (worth $600K) and I have paid down my mortgage (originally $270K) to be $1 outstanding. I (& my wife) also own a investment property ($1m) that we are planning on moving into in March next year.

Can I re finance and get a new loan (mortgage on the apartment) and use those funds to pay down my current investment property loan (future family home) ? And will the resultant interest be deductible.

Please note I am planning on moving out of my apartment in Oct this year and house sitting for 6 months for friends. Thus, the apartment would be "investment" from October.

Thanks

  • Eos Property | 09 Sep 2013, 05:48 PM Agree 0
    At best the interest, while the property is an investment, should be deductible.

    Once you move in the interest will no longer be deductible.
  • you know what? | 12 Sep 2013, 03:00 PM Agree 0
    I understand that, for the interest to be deductible, the purpose of the loan was to purchase an investment property. In your case the loan was to create a debt on the apartment (not to buy it)
    If I am wrong please tell me as this is the advice my accountant has given me.
  • Akagroup | 28 Sep 2013, 02:56 PM Agree 0
    The new loan will not be able to be claimed at tax time, as stated above the loan proceeds are for application on a loan relating to a property which will be your place of residence

    It is always recommended when buying and financing properties to structured them with tax benefits in mind from the point of finance.

    That is why people should always consider the benefits of offset accounts and discuss with an advisor if options would be best fit

    For example in your situation if you put all surplus funds in an offset account (saving interest while you occupied apartment) and not directly into the apartment loan, then from a tax point taking that surplus money from the offset account would not change or reduce your ability to claim interest when property reverts to an investment property. As from a tax perspective the loan was not repaid as funds sitting in offset account
    AKA Group Chartered Tax Advisers
  • Michael | 31 Jan 2014, 01:50 PM Agree 0
    Sorry, just to clarify that. If we have put extra money onto the loan to offset the interest, then withdraw that money to use to buy our next home, will the interest we can claim be inclusive of the money or not. To be more specific, we are ahead of our loan by $30k but can redraw it at any time, meaning we only owe 100k. If we take our 30k out for the next home, the loan would be back at 130k. Can we claim the interest on the 130k, or just the 100k?

    Thanks
  • Gerad Presely | 07 Feb 2014, 04:50 PM Agree 0
    In my opinion any financial institution would be slightly hesitant in allowing that type of deal. I am not an financial consultant, still my recommendation is don't opt for this type of finance.
  • Tom | 13 Jun 2014, 05:11 PM Agree 0
    Michael, if the $30k you redraw via a redraw facility is to fund a personal purchase (i.e. your PPOR), then it will not be tax deductible. If the $30k is sitting in an offset facility then you will be able to claim the total $130k as a tax deduction. In the eyes of the ATO an offset account and a redraw facility are treated differently. If you redraw, the the ATO will deem this as new borrowing that will be used for your PPOR. If the $30k is to purchase an income producing asset (i.e. shares/IP), then the full $130k will be tax deductible.
    It is always recommended to seek advice from a good tax accountant or mortgage broker before setting up a loan structure to purchase property.
  • Graham | 05 Sep 2014, 09:17 AM Agree 0
    I am relocating interstate for work and plan on renting out our PPOR and renting at new location.
    1. As I understand it from the above, I should make sure any loan on PPOR is fully redrawn and funds put in offset account prior to converting from PPOR to investment property.
    2. I need a depreciation assessment/report as this will be claimable post move.

    Thanks for any advice
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