PPOR to Investment

Hi, I am a big fan of SS. Long time reader and this is my first post so please bear with me.

I have three properties. Lets say they are A, B and C. A is my PPoR and B & C are NRAS Investment properties. I have borrowed equity from A (my PPoR) and used the funds as deposit for B & C. This has been working good so far.

Now I just signed a contract for another property, say prop D, which I would like to move into in 6-9 months time. The existing tenant on D has about 5 months lease left and after that I am planning to add another floor and move in. When I do that, ideally I would like to change my existing PPOR property A into an investment property and the new property D into PPoR.

Now my question is HOW do I go about it from tax perspective? Has anyone done something like this before?

a) Can I claim negative gearing on prop D until I start the building process?
b) How do I technically swap A with D as my PPOR? The simplest thing would be to sell A, take the money and run but it has a lot of potential and I would rather convert it into an investment property and improve it later on (may be a granny flat) to get some passive income going.

looking forward to your expert advise/direction (to reduce tax:))
 
Hi, I am a big fan of SS. Long time reader and this is my first post so please bear with me.

I have three properties. Lets say they are A, B and C. A is my PPoR and B & C are NRAS Investment properties. I have borrowed equity from A (my PPoR) and used the funds as deposit for B & C. This has been working good so far.

Now I just signed a contract for another property, say prop D, which I would like to move into in 6-9 months time. The existing tenant on D has about 5 months lease left and after that I am planning to add another floor and move in. When I do that, ideally I would like to change my existing PPOR property A into an investment property and the new property D into PPoR.

Now my question is HOW do I go about it from tax perspective? Has anyone done something like this before?

a) Can I claim negative gearing on prop D until I start the building process?
b) How do I technically swap A with D as my PPOR? The simplest thing would be to sell A, take the money and run but it has a lot of potential and I would rather convert it into an investment property and improve it later on (may be a granny flat) to get some passive income going.

looking forward to your expert advise/direction (to reduce tax:))

I'm in your position at the moment.

your answers below:

a) you can only claim deductions whilst it is an investment hence don't move in or untenanted whilst you engage in a reno

b) there is no trigger to make a dwelling your ppor simply 'living' in it is making it your new home. if you still have a loan (as oppose to loans for B & C) this part will be deductible when it is available for rent. best to stop paying any principle off the loan from now on and convert it to interest only. it would be advisable to also get a depreciation schedule completed and a written valuation done to establish a cost base. this cost base will form the cost price when you eventually sell to calculate any capital gains tax.
 
Hi GK

Welocme to the forum

please see below

Hi, I am a big fan of SS. Long time reader and this is my first post so please bear with me.


Thanks for coming out of the lurk

I have three properties. Lets say they are A, B and C. A is my PPoR and B & C are NRAS Investment properties. I have borrowed equity from A (my PPoR) and used the funds as deposit for B & C. This has been working good so far.

Now I just signed a contract for another property, say prop D, which I would like to move into in 6-9 months time. The existing tenant on D has about 5 months lease left and after that I am planning to add another floor and move in. When I do that, ideally I would like to change my existing PPOR property A into an investment property and the new property D into PPoR.

Now my question is HOW do I go about it from tax perspective? Has anyone done something like this before?

We need to make lots of assumptions.

If equity and servicing allows, draw some equity loan(s) from the 3 properties you own, each equity loan secured only to the one property ( assuming your places arent currently cross collateralised. Youd need about 25 % inc costs of the value of property D. Then get an 80 % lend on property D secured only to D.




a) Can I claim negative gearing on prop D until I start the building process?

the 25 % and 80 % loans above will be deductible while you are earning an income from property D


b) How do I technically swap A with D as my PPOR? The simplest thing would be to sell A, take the money and run but it has a lot of potential and I would rather convert it into an investment property and improve it later on (may be a granny flat) to get some passive income going.

looking forward to your expert advise/direction (to reduce tax:))

Im not a tax person so please seek specific tax advice

ta
rolf
 
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