Consolidate PROP and IP loans

I am new to investing in property.

I intend to convert my current place of residence to investment property as
I have purchased a bigger house which will be my new place of residence.

My current home loan is with ING.

I have got unconditional approval from NAB for my new ppor and I will
be settling in late June.

I went to see an accountant this morning who advised me that I should
think about consolidating ING loan to NAB before renting it out.

According to him, if i consolidate the loans, as there could me tax
advantages with this strategy as I should be able to borrow more
when converting my ING loan to NAB as the value of my house has
increased. SO I woule be paying less interest on my new PPOR and more
interest on my investment property. The idea is to maximise the tax
deductions on investment proprety.

This is bit too confusing for a novice like me..Can one of the experienced
members here tell me whether this is possible and if yes give me a bit
more explain as to how would i be able to achieve this?

No the increased borrowings are to be used to buy a PPOR, ie not for earning assessable income. It is the purpose of the borrowings, not the security that determines whether interest is deductible.
Get a new accountant, one who knows and has experience in property investing. What he has said doesn't make sense for two reasons.

1) Only the interest from the original borrowings would be deductible, as it is the 'purpose' of the funds borrowed that is important, not the security.

2) Cross-collateralisation should be avoided, if it can be whenever possible. It can create huge drama down the track, with trying to get money from the banks and also with selling, if you ever choose to do so.

I suspect the accountant has not articulated their thoughts very well.

Perhaps they were saying to combine loans with the one lender for better rate ?

Are ur accountants doing your mortgages ?


Also if any part of your loan is being used for personal expenses ie PPOR then the tax Dept will not take any portion of the loan as deduction. The is a large case with ATO at the supreme court where a client used a investment LOC with a few supermarket atm transactions. The ATO won the case as its too difficult to determine investment interest and personal. So yes get a new accountant and one that does not do finance.
~~scatches head~~

It was your accountant you rang and not the vet?

There maybe rate benefits with swapping over as previously mentioned but I wouldn't be getting too excited over the tax benefits mentioned.