Tax deductible implication on subdivision/turn PPOR into IP

[pcerr]

Hi, we plan to build a townhouse in our backyard, move into it and rent out the front one. Our current loan is $200k and we plan to borrow another $250k for the townhouse. How does this affect our tax deductible expenses? Can we claim the whole interest on our original loan (the $200k) as IP's interest expense?
Thanks guys

 

[Palabu]

With the details you provided, I think the answer is yes. You can claim the interest expense on the 200k loan from the time the front house is rented or available for rent. There are a host of other expenses you can claim also, rates, property management fee, etc. This is my twopence worth, but you should speak to an accountant who is familar with property investing.

P

 

[Palabu]

One thing I forgot to mention is you should have the front house valued by an independent valuer (not a real estate agent) once you move into the new townhouse. If you sell the front house down the track you will pay CGT based on the valuation.

P