Turning PPOR into Ip worthwhile?

[savoys]

Hi I'm new to the forum and would appreciate some insight into pros and cons of renting out my PPOR in regards to tax/ finance issues. As we have increased the mortgage over the past few years, would I be correct in thinking that only the original loan amount to buy this property would then be tax deductable against the proposed rent?

Thanks

 

[Aimjoy]

would I be correct in thinking that only the original loan amount to buy this property would then be tax deductable against the proposed rent? Thanks

Yes, only the original loan amount would be tax ded. UNLESS some of the further borrowings you made were used to do renos to your PPOR - then the extra amounts to do this would also be tax ded.

Additionally, if you get a QS report you will still be entitled to depreciation benefits as well - just like any other IP.

Cheers.

 

[josko]

It is also a great time to repair a few things and replace your hot water system etc.

I looked into this earlier this year, but we have so SO much stuff to move and the house is in my name, that it wasn't worth the NG Loss or my husband's back to move.

Regards JO

 

[savoys]

Thanks Aimjoy and Josko, there would be some deductions and it would be a good time to fix up a few maintenance items. This home doesn't suit our needs anymore, but I would like to keep it if possible.

 

[Aimjoy]

Ooooops! sorry but my first post should have read "Yes, only the original loan amount less any principal already repaid, would be tax ded. UNLESS some of the further borrowings you made were used to do renos to your PPOR - then the extra amounts to do this would also be tax ded.

Cheers and good on you for keeping the property with a view to making it an IP....I've just done the same

 

[wally]

Further question,
if an offset account on the loan had been used and then going from PPOR to IP, after redrawing from offset account the interest on the whole balance of the original loan would be deductible, correct?

 

[Qlds007]

Wally

The impact of the offset a/c has no bearing on the loan itself.

If you have no non deductible debt then keep the offset a/c where it is.
If however you are buying another PPOR then switch the offset a/c to the new home loan rather than offsetting deductible debt.

 

[savoys]

mmm , an offset account, think that's what I should have had, might get messy as I didn't have one, and to buy another PPOR maybe I might have to sell this one.- also should have found this forum earlier! Thanks

 

[MissMuffitt]

mmm , an offset account, think that's what I should have had, might get messy as I didn't have one, and to buy another PPOR maybe I might have to sell this one.- also should have found this forum earlier! Thanks

Do you have much equity in your current PPoR?

I know that it's X Coll, but if it lets you keep your PPor as an IP why not use some equity as the deposit for the next PPor?

Or... will that totally stuff up the tax deductibility of the loan...

We are thinking about moving down to the Bundy beaches next year, and will want to turn out PPor into an IP.

We might need to rent for a year and save some cash for deposit if it's going to stuff up the deductibility.

 

[bennido]

mmm , an offset account, think that's what I should have had, might get messy as I didn't have one, and to buy another PPOR maybe I might have to sell this one.- also should have found this forum earlier! Thanks

I have an old "salary account home loan" with Westpac and I am in the same boat as you. After many deposits and redraws, the tax deductibility part of the loan (if I convert it to an IP) is quite small relatively to the value of the original loan.

So I'll prob sell it and use the released equity and put it into PPOR and then create a new LOC to invest in another IP.

Quite sad really as this is my 1st home and I would have liked to keep it for sentimental reasons. Its in a good area with growth potential and the yields are quite good as well.