refinance PPOR, rent it out and then negative geared

[ringochan_au]

Hi

I have this situation and not sure I am doing the right thing

I bought my PPOR (a unit and we call it Property A) in 2007 and the home loan amount is 200k in P+I. On 1-Oct-14, the principal is only 70k. On 1-Nov-14, I refinance my PPOR and I borrow 400k which I have 330k can be redrawn.

On 5-Dec-14, I bought an investment property (a house and we call it Property B) which is 760k. BUT I change my mind and want to move into this house.

What I did so far --
- I redraw $76,000 for signing the sales contract.
- I know that I need to redraw another 10%($76,000) plus $40,000 stamp duty and I will take it from my redraw account

What I am going to do is redraw all remaining $138,000 (330k-76k-76k-40k) in redraw account and put it to the new loan of Property B.

Therefore, my property A has 400k loan and then rent it out. The rental income will not cover the interest so that I can claim negative gearing from the Property A which is my PPOR

My friend said it is legal to refinance old PPOR, draw the money to the new PPOR and then claim for negative gearing from old PPOR.

Am I right? Thanks!!

 

[thatbum]

Lol no. Your friend is wrong.

 

[ringochan_au]

Is anyone can explain it in details? Thanks a lot!!

 

[ringochan_au]

What happen if I rent out the Property A?

 

[marg4000]

If you rent property A you can claim a deduction for interest on the $70K which was the remainder if the amount you borrowed to purchase the property.

This may be reduced if there were previous redraws.

Consult an accountant
Marg.

 

[Terry_w]

What happen if I rent out the Property A?

At best you may be able to claim the interest on the $70k loan

 

[The Y-man]

Hi
. BUT I change my mind and want to move into this house.

This is where it all goes wrong.

You have now "borrowed" (the refinance is seens a a new loan) to buy your (new) PPOR.
So no tax deductibility.

If you stayed in your current PPOR, then buy a IP with the refinacne/draw down, then you can claim interest costs.

The Y-man