principle residence



From: H T

Has anyone ever been audited by the ATO having to prove that their primary residence is indeed their primary residence. The reason i ask this is that I'll be moving into my new apartment for a couple of weeks, but due to circumstances im going to unload it.
The loan will be an investment loan (cause i dont have the equity to cover a owner occ loan,- yes im lying to my lender)however, i'll be able to prove that this is my primary residence with bills, licence change etc. to the new address as i really will be moving into it for a "little while".
Will the ATO go to the extent of serving a subpoena on the bank where i got my loan as this will be the only evidence that it may of been an ip because of the nature of the loan, or will they just need some proof that i lived there?
Its the intention of the owner that has to be proved - when i purchased this flat it was my intention to live in it but my situation has changed..

I have another flat that is definitely only an ip

any help appreciated
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Reply: 1
From: Mr S

If it is your primary residence... Then it's your primary residence... The bank is only interested in whether it's an IP or not to determine if they'll lend you the money or not.
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Reply: 1.1
From: PT Bear

I've you've lived in your current residence long enough to get a few bills from the utility companies and you own the house, you've established it as your primary residence, thus it is not subject to CGT.

You can move out of your primary residence for up to 6 years and still call it your primary residence (there are other threads on this topic). You'll be able to live in an apartment for this long and still not have your house being subject to CGT. The bank might be interested for loan purposes (although I don't think it's fair that they do this), but the type of loan has nothing to do with the rules regarding primary residence (confirm this with an accountant).

(aka Peter_T when he's hungry)
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Reply: 2
From: Terry Avery

I would think the ATO would only be interested in the purpose of the loan if
you were trying to claim a tax deduction for the interest. As it will be
your primary place of residence they would not be interested in the type of
loan as you are not going to claim the interest.

Shame that you have to unload a property. Why is that? Couldn't you
structure your affairs to keep it?

PT Bear said he doesn't think it is right the bank should be interested in
how you use the money. I would say if PT Bear lent someone money to buy say
a car and they blew it at the races wouldn't he be a little upset at the
misuse of the funds? It is their money and they have a fiduciary duty to
ensure it will be used for the purposes you tell them it is for. Years ago a
higher interest rate applied to IPs so people quietly rented their houses
out and when the bank found out they bumped up the interest (as per the
contract). Now with IP and own home rates the same it is probably splitting
hairs although if you take out an IP loan and then live in it the bank may
take issue with that as they lent the money on the basis you would have
extra income in the form of rent coming in to service the loan. If you live
in it then that is a different situation. You can get interest only loans
for your own residence the same as for IPs. The only differences are the
name of the loan product, the intent for the money borrowed and the income

I would be interested in hearing more details of your situation if you
wouldn't mind telling.

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Reply: 2.1
From: H T

Yes it is a shame i have to sell it but its an expensive 2 b/r flat that has risen in value by at least 20% from what i brought it off the plan 1.5 years ago. I figure if i can make some tax free dollars then seek out other deals im better off.
I hate to sell anything 'cause im from the buy and hold school, but the gains ive been seeing lately...i just know they cant continue.
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Re: principle residence - IP interest rates

Reply: 2.2
From: PT Bear

Hi T_Avery,

I couldn't agree more with your statement that the bank has a right to know what you're going to do with their money. They'd be silly not to find out. I guess I wasn't clear on what I meant with my previous comments and they were out of context to the topic anyway.

Last time I looked closely (about a month ago), my banks rate for IP was 0.01% higher than for owner occupied. I know it's a nominal amount for most people, but it's not really going to change the level or risk the bank is exposing itself to. I would have hoped that IP was a lower risk than owner occupied (probably a pipe dream, the way I see some people invest).

From where I'm standing as a newbie with only one IP which is generating excellent cashflow and growth, the idea of the bank having extra risk seems a bit petty.

I think I'll shop around some more.

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Re: principle residence - IP interest rates

Reply: 2.2.1
From: Terry Avery

Hi PT_Bear,

I agree with you on the risk factor. I wonder if they think that if it is
your own home you will do everything possible not to lose it and therefore
judge private residence to be lower risk. I am surprised that there is even
a difference of 0.01% and while the figure appears low I am sure over the
course of the loan the extra interest is significant. You are right to shop


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