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Moving back into Investment property

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Cindy | 19 Aug 2013, 06:24 PM Agree 0
Hi there,

Hoping someone can answer my question.

I have an Investment property and used around 70K equity in this property to buy the house I live (so my loan increased by 70K). I didn't realise the tax implication of this and found out later that I could not get a tax offset on the interest on the 70K, only the original loan amount. I'm wondering if I move back into the property for a few years and then rent it out again can I then use the interest generated on the full loan amount (including the 70K) to get a tax offset?

Thanks for you time :)
  • Eos Property | 19 Aug 2013, 08:47 PM Agree 0
    Hi Cindy,

    The problem you have is that you have now mixed the purpose/s of your loan/s. This means part of your loan will remain undeductible forever unless you restructure your loans.

    You may be able to retrieve the situations through a splitting of existing loans process.

    I would suggest you find yourself a decent accountant and ask about splitting your existing loan into two parts; one for the investment property and the other for your home. Armed with your accountants approval (or not) then approach your broker to see if they can help.

  • Cindy | 20 Aug 2013, 10:52 AM Agree 0
    Thanks for replying to my question.

    I was already looking into having a separate loan for the non investmnet property portion of the loan and my bank was willing to do this but then I started thinking I might be best to live in the property again as my PPR and then rent it out after a few years.

    I rang the ATO and explained the situation that 70K was used for non investment property purposes and that I would move back into the property for a few years and then rent it out again. They said I would be able to claim a tax offset on the interest on the whole loan when I rented the property out again? Because I gather the property is being converted from a PPR to an investment property again at the time.

    I'll contact my accountant to see what they say.
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