W
WebBoard
Guest
From: Sam A
I'd like to solicit ideas for structuring the financing of my 1st place of residence (POR) in a manner that allows me to utilise the 'cash equity' built this home in a tax effective manner should I wish to move into my 2nd POR and retain the 1st as a IP.
I understand that if one borrows money against their IP and uses it to pay down their POR, the loan is not tax deductible.
However what about the following scenario:
*setup a mortgage offset account or similar against loan for 1st POR. Reduce interest expenses by accumulating cash against offset instead of paying down loan
*just prior to the time I wish to buy home #2 (new POR), I move funds out of home #1 offset account into a parking account. I then buy home #2 and use funds in parking account to reduce non-deductible debt on home# 2
*turn home #1 into IP, thereby maximising what is now deductible debt and reducing non-deductible debt on my new POR
As a compouding factor, what if home #1 was a part IP (living in it but renting rooms to claim it as part income producing for deductability purposes) before becoming my POR outright. Here, the offset strategy is inacted whilst being part IP, with the offset being drawn-down when it becomes my fully POR (prior to buying POR #2).
Are there any downsides to this including how the ATO perceives this? Are there other ways to skin this cat?
I'd like to solicit ideas for structuring the financing of my 1st place of residence (POR) in a manner that allows me to utilise the 'cash equity' built this home in a tax effective manner should I wish to move into my 2nd POR and retain the 1st as a IP.
I understand that if one borrows money against their IP and uses it to pay down their POR, the loan is not tax deductible.
However what about the following scenario:
*setup a mortgage offset account or similar against loan for 1st POR. Reduce interest expenses by accumulating cash against offset instead of paying down loan
*just prior to the time I wish to buy home #2 (new POR), I move funds out of home #1 offset account into a parking account. I then buy home #2 and use funds in parking account to reduce non-deductible debt on home# 2
*turn home #1 into IP, thereby maximising what is now deductible debt and reducing non-deductible debt on my new POR
As a compouding factor, what if home #1 was a part IP (living in it but renting rooms to claim it as part income producing for deductability purposes) before becoming my POR outright. Here, the offset strategy is inacted whilst being part IP, with the offset being drawn-down when it becomes my fully POR (prior to buying POR #2).
Are there any downsides to this including how the ATO perceives this? Are there other ways to skin this cat?
Last edited by a moderator:
