IP to PPOR

[bits1010]

Hello all, long time reader, but I think it is time to buy. Therefore will need your advice...

Interested in an land + existing house, love the location, it will highly possible to be our PPOR later, but at the moment will happy to buy it as IP first... questions

1. If I need to pay say 10k as LMI premium, I have heard that I can deduct this expense across five years ? what happen if I added that premium back to the loan then negative gear the interest on the whole loan ? will this be double dipping ?

2. If this IP is linked with an offset account, then will money in and out of the offset account have no impact on the negative gearing for the interest cost ? I have heard that if you do not have an offset account and you redraw on the loan to buy something not related to the investment activities then you might not be able to deduct the whole interest amount ?

2. what will happen say in 5 years time I convert it to PPOR, so the CGT will be applicable when I sell as calculated as [years rented out] / [years own] ?

3. the land has about 20% at the front as easement as drainage, but you cannot see it, will the lender say anything and impact on their valuation ?

thanks

 

[Rolf Latham]

In blue below

ta
rolf

Hello all, long time reader, but I think it is time to buy. Therefore will need your advice...

Interested in an land + existing house, love the location, it will highly possible to be our PPOR later, but at the moment will happy to buy it as IP first... questions

1. If I need to pay say 10k as LMI premium, I have heard that I can deduct this expense across five years ? what happen if I added that premium back to the loan then negative gear the interest on the whole loan ? will this be double dipping ?

no double dip, the depreciability of the LMI premium and the deductability of the loan interest to buy same are different. The LMI premium is a borrowing cost, the borrowing is interest against income

2. If this IP is linked with an offset account, then will money in and out of the offset account have no impact on the negative gearing for the interest cost ?
the more cash in the offset, the less interest you pay, the less the interest deduction.


I have heard that if you do not have an offset account and you redraw on the loan to buy something not related to the investment activities then you might not be able to deduct the whole interest amount ?

correct. Loan contamination

2. what will happen say in 5 years time I convert it to PPOR, so the CGT will be applicable when I sell as calculated as [years rented out] / [years own] ?

I will leave this one to the tax peops

3. the land has about 20% at the front as easement as drainage, but you cannot see it, will the lender say anything and impact on their valuation ?

usuaally not

thanks