Redrawing from PPOR loan

[Sam_H]

Hi guys...quick question...just wondering if the ATO will let you do the following:

I am hoping to refinance my existing PPOR loan -in order to take some cash as a deposit on another house -at the same time changing my existing PPOR into an IP (ie rent it out)

eg using numbers as:

Initial PPOR Loan amount =$300k
PPOR Value (guess) = $500k
PPOR Loan owing = $260k
Equity: $240k


Can I refinance to say 80% of the properties value (ie 80% x $500k = $400k)

-which puts $400k - $260k =$140k into my pocket for a deposit on a new place...and a new loan of $400k against my original PPOR which would then be rented out...and hopefully the full $400k be tax-deductable

Any comments?

Regards Sam

 

[Rolf Latham]

Hi Sam

The ATO will only allow the initial residual debt (260 k) to be carried through as an IP (deductble) debt.

The major reasoning is that the new funds above the 260 are not for income producing purposes but for a new PPOR.

There may be some other ways to get some more dedn's incl an exist partner selling their half to you, or you selling all of the place into a HDT etc.

Sepak with a good independent broker and a tax/legal structuring advisor.


ta

rolf

 

[Mry]

Remember, it is the purpose of the funds, not the security, that determines tax deductibility.