Purchasing IP for future PPOR

Hi there,
I'm just wondering if anyone can give me any info regarding making an IP into our PPOR down the track? We own our current PPOR and want to buy an IP that we can move into when we are ready for a bigger place. Are there any rules about this as far as us claiming all the purchase costs ect? I have looked for info but all I seem to find is info on people turning their PPOR into IP's.
Thanks for your time :)
 
Some many questions so little space to answer them on.

When you say you own the property i assume you mean you have no mortgage secured against it.

Regretfully the interest on your new PPOR will not be deductible so many considerations.

Might want to consider selling your current PPOR to a Unit Trust and borrowing 100% of the market value. Doing this will mean the unit holders can claim 100% of the interest as a deduction and the total amount can be used to purchase a non decuctible PPOR.

Disadvantage would be stamp duty payable on the transfer but if the figures work and you intend to to hold the property long term well worth considering.

Done many of these for clients over the time but each client has different circumstances.
 
Thanks for the reply. So even if we aren't going to live in the IP for at least 5 years, we can't claim tax deductions in the meantime? We want to buy something reasonably soon but we are renovating our own house at the moment and won't be ready to move for a few years. :)
 
Thanks for the reply. So even if we aren't going to live in the IP for at least 5 years, we can't claim tax deductions in the meantime? We want to buy something reasonably soon but we are renovating our own house at the moment and won't be ready to move for a few years. :)

IP now & while it is ever an IP = all costs fully tax deductible.

Tax deductability stops when you use it for private purposes = when you move in as your PPOR
 
That was the answer I was hoping for!! I wasn't sure if our intention to live in it at some stage would be a factor in tax deductions in the meantime. Thanks for your help.
 
Just to add to the above, my accountant seems to think that the purchase costs won't be tax deductible but the holding costs will be ie. insurance, interest etc. Does that sound right??
 
Just to add to the above, my accountant seems to think that the purchase costs won't be tax deductible but the holding costs will be ie. insurance, interest etc. Does that sound right??

Your accountant is correct.

The purchase costs get added to the cost base - so only become tax deductible on the sale of the asset (if used as an IP the whole time).

Although MI and loan est. fees get ded'd over 5 years, from memory - just check.
 
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Yes your A/c is correct.

Loan costs, LMI are deductible over 5 years or the Term of the loan whichever is lesser and proportioned in Year 1.
 
Yes your A/c is correct.

Loan costs, LMI are deductible over 5 years or the Term of the loan whichever is lesser and proportioned in Year 1.

Soo, if I were to buy a house On 1 July 2009 as an IP but then move in after 2 years (2 July 2011), would I end up only being able to claim 40% of these costs? Or does it have anything to do with the "term of the loan" as an IP loan? I will be performing this exact scenario except probably moving in after only 1 year. So I'm guessing I can claim 20% in the first year when it's an IP and that's it?
 
BTW, I guess if was to re-fi after 1 year then the loan term for the original loan = 12mths & therefore all borrowing costs could be claimed in the first year?
 
BTW, I guess if was to re-fi after 1 year then the loan term for the original loan = 12mths & therefore all borrowing costs could be claimed in the first year?

This is correct. Just make sure the terms are better or something so that you're not seeming like you're doing it for the sole purpose of obtaining a tax benefit.

Oh and to the post before - You would only be able to claim the first 40%. The remaining 60% would be added to your costbase.
 
Also consider the Capital gains tax implications.
You will need to pay CGT on the capital growth of property for the period it was an IP.
Pen
 
Also consider the Capital gains tax implications.
You will need to pay CGT on the capital growth of property for the period it was an IP.
Pen

He possibly would either way cause spouses are only allowed one PPOR between them (basically treated as though one person).
 
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