Hi all!
I know there are a bunch of PPOR to IP threads in existence already, and I have read a fair few of them... but this question is farily unique, and would probably require me to read all eleventy billion PPOR to IP threads.
Anyway, here's the situation:
- My workmate just recently purchased a damaged home at auction.
- Bought at well below market value, due to the damages.
- He is renovating and fixing up the damage, and moving in straight away to claim the FHOG and stamp duty exemptions.
- He has negotiated with his bank to get an interest only loan, with an offset account, and has also negotiated to be allowed to "top up" the loan after the renovations to the true market value.
..... to explain that... lets say he bought the property for $250K with the damage. He gets loan for 90% = $225K.
After the renovations, lets say the property is worth $300K.... and he has negotiated to be able to "top up" the loan to $270K (90%).
Now... the question is this, relating to deducability....
- He is moving into the house for 6 months to get the FHOG, and within that 6 months (he is hoping within 3 months) intends to get the loan topped up to the true market value after repairs/renovations are done.
..... so, once he moves out after 6 months and turns the property into an IP, will the full amount of the debt be deductable?
IE - will the full $270,000 (after the topup) be tax deductable once the property becomes an IP.
Of course, he will be sticking the $45,000 from the topup into his offset account, and will only use this $45,000 for buying more properties, and not for personal expenses.
... Im pretty sure it will be deductable, but im not very experienced with tax matters. Yet.
I know there are a bunch of PPOR to IP threads in existence already, and I have read a fair few of them... but this question is farily unique, and would probably require me to read all eleventy billion PPOR to IP threads.
Anyway, here's the situation:
- My workmate just recently purchased a damaged home at auction.
- Bought at well below market value, due to the damages.
- He is renovating and fixing up the damage, and moving in straight away to claim the FHOG and stamp duty exemptions.
- He has negotiated with his bank to get an interest only loan, with an offset account, and has also negotiated to be allowed to "top up" the loan after the renovations to the true market value.
..... to explain that... lets say he bought the property for $250K with the damage. He gets loan for 90% = $225K.
After the renovations, lets say the property is worth $300K.... and he has negotiated to be able to "top up" the loan to $270K (90%).
Now... the question is this, relating to deducability....
- He is moving into the house for 6 months to get the FHOG, and within that 6 months (he is hoping within 3 months) intends to get the loan topped up to the true market value after repairs/renovations are done.
..... so, once he moves out after 6 months and turns the property into an IP, will the full amount of the debt be deductable?
IE - will the full $270,000 (after the topup) be tax deductable once the property becomes an IP.
Of course, he will be sticking the $45,000 from the topup into his offset account, and will only use this $45,000 for buying more properties, and not for personal expenses.
... Im pretty sure it will be deductable, but im not very experienced with tax matters. Yet.
