Switching PPOR and IP

[bspanovic]

Hi
My wife and I are looking to purchase IP (NSW). Our PPOR is in my name only, fully paid off and bank used it as a security for the lP loan. I am the major earner while my wife pays no or very little tax. Once we purchase IP we are planning to initially rent it out and then move in within a year or so and then rent out our current PPOR as IP. Doing that can we:
-still claim negative gearing as our current PPOR will become IP and vice versa. Both properties will be taken as security by banks and neither rental would cover interest on IP property loan. Current PPOR is in my name only while IP title and Bank loan can be in either both names or just mine. We are looking to reduce my income tax.
-any other legal or tax implications that may come in play.
Thank you very much in advance!

 

[Rolf Latham]

Hi BSP

To a large extent I expect the train left the station without you when the current PPOR was fully paid off.

Poor credit advice if the banker/broker asked that question

Not quite enough data to really help, but on the surface

Bank will lend you 105 % to buy new IP,
105 % deductible while IP

zero deductible once owner occ

and

full taxation on the rental income received from old ppor, minus basic running costs

consider selling old PPOR, or a spousal sale, or maybe a sale to a unit trust

ta
rolf

 

[Terry_w]

You will be able to claim interest on either property when available for rent. But only the interest on a loan that relates to the purchase of that property. It sounds like you have no such loan on your PPOR at the moment so when you move out and rent it you will likely have a large positive cashflow which you will pay tax on.

You will also have a loan on the new one and be paying interest which you won't be able to claim if you are living in the property..

So extra tax and extra interest.

 

[bspanovic]

Wow, better start looking into plan B right now.... So if we now proceed with the loan and purchase IP, once we decide to switch places around we should refinance and have our current PPOR mortgaged to be able to claim interest?
Would that be relatively painless workaround giving that refinancing is cheap these days and affordability figures work for us with the Banks? If so where is the ?gotch ya? then?

 

[Rolf Latham]

Wow, better start looking into plan B right now.... So if we now proceed with the loan and purchase IP, once we decide to switch places around we should refinance and have our current PPOR mortgaged to be able to claim interest?
Would that be relatively painless workaround giving that refinancing is cheap these days and affordability figures work for us with the Banks? If so where is the ?gotch ya? then?

refi aint gonna change the outcome, no more than re-arranging the deck chairs on the Titanic.

The mould was cast when the now PPOR was paid off.

You may have some options as per my earlier post

ta
rolf

 

[bspanovic]

Hmmm, so if current PPOR is paid off can?t I just reverse mortgage on it and pay off my IP loan? The bank is still holding my PPOR title even no money owned and are willing to loan me money.
Cheers

 

[Rolf Latham]

Hmmm, so if current PPOR is paid off can?t I just reverse mortgage on it and pay off my IP loan? The bank is still holding my PPOR title even no money owned and are willing to loan me money.
Cheers

you can do that

but thats arranging the deck chairs

seek specific tax advice Id suggest, self medication may be a wealth hazard here

ta
rolf

 

[bspanovic]

Will do. Thanks.

 

[Terry_w]

Wow, better start looking into plan B right now.... So if we now proceed with the loan and purchase IP, once we decide to switch places around we should refinance and have our current PPOR mortgaged to be able to claim interest?
Would that be relatively painless workaround giving that refinancing is cheap these days and affordability figures work for us with the Banks? If so where is the ?gotch ya? then?

See my post above. If you were to do this the purpose of the borrowings would be to pay down private debt and no deduction.