Converting PPOR to IP

[matto_]

Hi All,

I am sure this has been asked before (tried search but no joy).

We are considering converting our current PPOR to an investment property and either
a) purchasing a new PPOR

b) converting one of our other current IP's to a PPOR.

From an ATO perspective what are the mechanics and physical things I need to do (ie, valuation, call and tell them?)

Also - our current PPOR has a very low amount of debt (hence low level of non-deductible debt). Is there anyway of maintaining this low level of non-deductability without selling the current PPOR?

Thanks in advance,

Matto.

 

[D.T.]

How long have you lived in the PPOR mate?

 

[matto_]

Have done the 6 year rule a couple of times, but originally lived in it for approx 3 years.

Current Val high 600s. Loan 100.

 

[Terry_w]

Have done the 6 year rule a couple of times, but originally lived in it for approx 3 years.

Current Val high 600s. Loan 100.

Jointly owned?

 

[Rolf Latham]

Have done the 6 year rule a couple of times, but originally lived in it for approx 3 years.

Current Val high 600s. Loan 100.

ouch : (

100 k deductability wont make for much of a dedn, thus when u borrow for a new PPOR, your loan will be yucky big, or prob even moving into one of your existing IPs

Might have to look at a spousal sale, OR a unit trust sale.

Stamps involved on the unit trust but dependent on a bunch of things may be worth while. May get away with love and devotion on a spousal sale in regards of stamps, so may be an option.

Careful structuring here may yild some significant immediate "debt recycling" .

ta

rolf

 

[matto_]

Yes jointly owned.

 

[Terry_w]

In that case one spouse can buy out the other at full market value and borrow to do so. In VIC stamp duty is probably exempt. The purchaser can borrow to do so and the interest should be fully deductible if the property will be used as investment. All the usual deductions would apply.

This will free up cash and increase deductions.

Seek advice as you need to proceed carefully.

 

[matto_]

Hi Terry,

Thanks for the prompt reply. We are just tossing around ideas at the moment.

Our current PPOR is the first Property we bought, and have been renting ever since. Had never really considered moving into one of the other properties until very recently.

Who would I get advice from - accountant, financial planner?

As an aside - how would others get around this, ie. converting PPOR with low loan amount to IP in order to move to bigger/better PPOR? Or is the only option to sell current PPOR, buy new PPOR, along with different IP?

Thanks,

Matt

 

[Terry_w]

hi Matt,

You would need legal advice on the stamp duty issue. Probably best to consult with your accountant too on the tax side.

Most people would either wear the extra tax or sell the house completely. Don't think many are aware of the stamp duty exemption in Vic - it wouldn't work like that in NSW either.

 

[Aaron_C]

The best way to recycle the debt into tax-deductible debt is to use the strategy that Terry mentioned. Otherwise sell.

 

[Mry]

See your accountant, then see the lawyer so you can come up with a plan.

It may be cheaper to sell the old property and buy a new property on an interest only loan rather than to hold onto the old one. Most people do have an emotional attachment to the old property so its understandable that you want to hold onto it.