PPOR conversion

[Matt]

Hello, I have decided to move on from living in my PPOR in Brisbane (paid-off). I was going to sell but have decided against this due to the obvious benefits of retaining the property (good area) as an investment and not having to pay selling costs.

I wish to source a new PPOR and might even rent for 6-12 months whilst doing so.

Q1. What is the process for transferring a property from PPOR to IP?

Q2. What are the best options to take when purchasing the new PPOR? Should amounts be left in the IP to retain its +ve cashflow or should I juggle the funds to such a degree that the maximum amount is paid off the new mortgage thus reducing NTD payments?

Many thanks for any help.

Matt.

 

[DaleGG]

Originally posted by Matt
Hello, I have decided to move on from living in my PPOR in Brisbane (paid-off). I was going to sell but have decided against this due to the obvious benefits of retaining the property (good area) as an investment and not having to pay selling costs.

I wish to source a new PPOR and might even rent for 6-12 months whilst doing so.

Q1. What is the process for transferring a property from PPOR to IP?

Q2. What are the best options to take when purchasing the new PPOR? Should amounts be left in the IP to retain its +ve cashflow or should I juggle the funds to such a degree that the maximum amount is paid off the new mortgage thus reducing NTD payments?

Many thanks for any help.

Matt.

Hi Matt

If the loan on the existing PPOR is already repaid, no loan on this property will be tax deductible. So, if you use the equity on this house to borrow money for the new one, you cannot claim the interest.

Bummer, huh?

Dale

 

[Luke]

Definite Bummer

Welcome to the forum...

Re: Qn1 - You would also be wise to get valuations on your old PPOR to establish a cost base for CGT purposes) Preferably from a licensed valuer, or at least 3-4 in writing reccomendations from real estate agents. this post discusses some of the other options.

While it's a bummer, it doesn't stop you borrowing against the original PPOR to buy an income producing asset (shares or another IP etc) with those costs being deductable. Dale would be able to give you professional advice on this. Or try searching for posts by Steve Navra & cashbonds for some other ideas.

Good luck,
Luke

 

[Matt]

Dale and Luke, thanks for the prompt and informative reply.

Matt.

 

[roughana]

Re: Definite Bummer

Originally posted by Luke
Re: Qn1 - You would also be wise to get valuations on your old PPOR to establish a cost base for CGT purposes)

Is the cost base taken as at the time that the PPOR becomes an IP or is it taken at the time 6 years later when you lose the CGT exemption?

My PPOR is available for renting as at 1/11/02, however I am renting elsewhere, so the PPOR is still my PPOR until I buy a new PPOR or 6 years elapse. When does the CGT cost base need to be established in my case?

Thanks,
Andrew

 

[DaleGG]

Re: Re: Definite Bummer

Originally posted by roughana
Is the cost base taken as at the time that the PPOR becomes an IP or is it taken at the time 6 years later when you lose the CGT exemption?

My PPOR is available for renting as at 1/11/02, however I am renting elsewhere, so the PPOR is still my PPOR until I buy a new PPOR or 6 years elapse. When does the CGT cost base need to be established in my case?

Thanks,
Andrew

Hi Andrew

The new cost base is taken at the time that the property first becomes available for rent. Now is a good time, in preparartion for the future and to keep your options open.

have fun

Dale

 

[manny]

Folks,

what if you intend converting your fully paid PPOR to an IP 1 year down the track & speak to the bank & take out a loan (finance) on the PPOR @ 80% & then whack that 80% into an offset account... then 1 year later you draw that 80% from your offset account & place it into your new PPOR, would the interest payable then (on the 80% balance) be considered tax deductible? or would it be seen as a tax dodge?

Cheers,

MannyB.