Equity from IP for PPOR deposit

[Montoya]

I think I'll be wanting to purchase a PPOR in the next 12-18 months. The only issue is that I don't anticipate to have a large cash amount (35-40k). I do however expect to have a bit of equity from two IPs.

From my understanding though, I'd be contaminating my loans as I would not be able to claim the interest on the equity loan amount as its use is not for investment purposes.

Is there anyway around this? My first thought would be to perhaps invest the amount in shares first, and then sell the shares a short time later to use as a deposit. CGT would be minimal, if any, and i'd assume the benefits of being able to claim the interest would offset the one off costs of trading (or am i missing something here?)

Any other possible solutions?

 

[Rolf Latham]

Just use a separate loan secured to the IP for deposit and costs and u can account for them separately

Ta

Rolf

 

[Terry_w]

Is there anyway around this? My first thought would be to perhaps invest the amount in shares first, and then sell the shares a short time later to use as a deposit. CGT would be minimal, if any, and i'd assume the benefits of being able to claim the interest would offset the one off costs of trading (or am i missing something here?)

This is not a solution as the loan used to purchase the shares would need to be paid back - i.e. no longer deductible.

What you should be is set up a new split to be used for the new PPOR. But also seek some tax advice on setting up another split to be used to pay investment expenses so that you could then free up more cash in the offset account for the new PPOR>

 

[Montoya]

This is not a solution as the loan used to purchase the shares would need to be paid back - i.e. no longer deductible.

I thought that would be the case.. well played ATO, well played.

What you should be is set up a new split to be used for the new PPOR.

Do you mean like a LOC loan?

 

[Jamie M]

Do you mean like a LOC loan?

A LOC or a normal term loan. The former costs a bit more in terms of rates.

The important thing is that it's set up as a separate facility as has been mentioned above.

Cheers

Jamie

 

[Terry_w]

I thought that would be the case.. well played ATO, well played.



Do you mean like a LOC loan?

ATo doesn't make the laws, justs enforces them (in its own favour).