PPOR to INVESTMENT

[gussman]

Hello there people,

I stumbled on this forum and have found it to be great.

I have a query hope someone can give some advice.

I have 2 properties that i call property A and property B.
Property A is my PPOR which I plan to build a unit on the back of existing house. This house is fully paid of with 40K available in redraw.

Property B is an investment property with 180 K owing.

I wish to move in to property B after property A is developed.

I wish to keep the 2 properties at property A and rent them out.

I will need approx 150-160 k to develop property A so i understand that this will be deductible debt once i convert this to investment property.

If I redraw the 40K that is currently in the redraw in property A and put this into property B whilst this is still an investment property, will that 40 K be deductible once this property A is rented out.

I am trying to limit the amount of non deductible debt for property B which I am moving into. I would like to make all the 320k deductable but I can not see a way to do this.

140 K non-deductable debt is still better than 180k.

Does anyone know the rules attached to redrew for investment purposes or think this scenario is legal.

thanks,

 

[gussman]

anyone got any answers for me

 

[The Y-man]

If I redraw the 40K that is currently in the redraw in property A and put this into property B whilst this is still an investment property, will that 40 K be deductible once this property A is rented out.


thanks,

The purpose of the 40k needs to be for income production - in your proposed scenario, it sounds more like debt reduction on the iP.

Cheers,

The Y-man

 

[gussman]

yeah that what I was thinking, but by putting money into the loan on that property I will be increasing income production as I am reducing the debt.

Is the any other ways to reduce the non deduct debt from property b apart from selling property A to a trust.

In hindsight I could have done things differtly but that hindsight for ya.

cheers

 

[bort]

i would guess that if you take out the 40k and put it in property B it is deductible - as far as i know a loan to pay off another deductible loan is perfectly legitimate - a quick search on the forum should confirm that.

However, when you actually move into property B, at which point the deduction no longer relates to an income earning investment, so may be disallowed from then onwards.