Is Interest deductable if PPOR -> IP ?

[Wiseguy]

If the purpose of a loan was to purchase a PPOR and then in 6-12months i rented the property out for the remaining years, will the interest repayments be tax deductable?

I cant remember where i read it, but i heard that repayments will NOT be deductable since initial purpose was for personal uses.

Can anyone confirm this?

THanks in advance!

 

[DaleGG]

Hi

Yes, the interest on the loan would be tax deductible once the property is available for rent.

Dale

 

[Ray Brown]

PPOR into IP

Hi all,

A friend at work asked the question...

"My wife and I are both named on the title of our PPOR. Is there an easy way to turn it into a rental property? I earn 65K pa and she earns nothing as a live at home mum. Is it worth the trouble and cost of transferring the property into my name only?"

and this...

"We bought our PPOR for $200K. Now its bank valuation has reached $300K. Can I get access to that $300K as cash for the purchase of a new PPOR?
(the larger repayments now tax deductable as a rental IP)"

I thought I could answer these questions easily but I couldn't explain it very well. I would say to the first question, No. Just sell and start again. And the 2nd question, no, only redraw up to the value of the original loan.

anybody else?

 

[Aceyducey]

Ray,

For the first one:

1) Could set up a Trust & sell the property to the Trust. There are Stamp Duty implications & it's not cheap upfront but over time will balance out. Or the wife could get a job

2) No borrowings on an IP for purchase of a PPOR are tax-deductible. Not even a redraw to the original loan value. They could set up a Trust, buy the PPOR via the Trust & rent it from the Trust.....but if the Trust isn't demonstrably being used for investment purposes this is legally very dangerous - so they'd have to buy a couple of other IPs in the Trust at the same time & potentially rent out the property they do want to live in for awhile as well.

3) Come and ask the questions themselves in the forum!

Cheers,

Aceyducey

 

[DaleGG]

Hi

Your friend could salary sacrifice his salary and have his employer pay the interest on the loan. As the interest is otherwise deductible to your friend, there is no FBT problems with this strategy, and, he effectively gets 100% of the interest as a tax deduction.

Dale

 

[BV]

Hi all,
"We bought our PPOR for $200K. Now its bank valuation has reached $300K. Can I get access to that $300K as cash for the purchase of a new PPOR?
(the larger repayments now tax deductable as a rental IP)"
anybody else?

You could buy your wife out for $150K
and then you will have a new loan on the house.
You then move out and convert the existing PPOR
to an IP. I would get a vauation done
so that the state revenue office is satisfied
and would involve a solicitor so that its all legit.

Get a receipt from the Mrs and keep
records of the bank cheque
make sure the wife doesn't run off with the 150K LOL

The 150K loan then becomes tax deductible
and you can use your wife's 150K as a deposit to your
new PPOR.
cheers

 

[Twitch]

Hi all,

A friend at work asked the question...

"My wife and I are both named on the title of our PPOR. Is there an easy way to turn it into a rental property? I earn 65K pa and she earns nothing as a live at home mum. Is it worth the trouble and cost of transferring the property into my name only?"

I live in Victoria, and the cost of doing a tranfer from joint names to one name is $100 (no stamp duty is payable), and the effort is minimal. Just get the right form from the titles office, fill it in and get it witnessed, then lodge it with the SRO & titles office. However to do so with the obvious intension to reduce tax may not wash well with the ATO.

 

[BV]

I live in Victoria, and the cost of doing a tranfer from joint names to one name is $100 (no stamp duty is payable), and the effort is minimal. Just get the right form from the titles office, fill it in and get it witnessed, then lodge it with the SRO & titles office. However to do so with the obvious intension to reduce tax may not wash well with the ATO.

In NSW stamp duty is payable,
People buy and sell property all the time.
I don't see why the ATO will have concerns as long as
a legit valuation is done to determine the actual value
of the property prior to title transfer.

cheers