Converting PPOR to Investment

Discussion in 'Accounting & Tax' started by Will146, 18th Aug, 2018.

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  1. Will146

    Will146 Member

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    Hi all.
    I know the question of turning a PPOR in to an investment has been asked alot but I was hoping for some specific advice mainly due to our new PPOR being a OTP so we have two years to play around with our finances & we are hoping to stream line them the best we can.

    Current PPOR mortgage (Eventually to become Investment)
    Value Around Mid $700,000's
    Owing High $300,000's
    Offset Around $70,000 cash

    LOC set up against current PPOR for OTP
    Owing Around $70,000 for 10% deposit / Stamp Duty etc
    We will need to borrow around $500,000 upon completion in early 2021

    We have only just refinanced the above through a broker but we are wondering if this setup is the best to maximise future tax deductions or if it would be worth talking to another broker to look at other options.

    Out plan is to pay as much as we can in to our current PPOR offset account for the next two years & then use this cash to pay down the OTP upon completion.

    I know this is not a great situation to be in from a tax perspective but I hoping that due to the long time frame we have to work with there may be something we can do now to benefit us moving forward.

    Any advice would be much appreciated.

    Thanks everyone :)
     
  2. Mike A

    Mike A Accountant Business Member

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    doesn't sound too horrible. when you move out of the PPOR and turn it into an investment the $300k will be deducibtle. money taken out of the offset attached to that loan wont be an issue re deductibility.

    what are your concerns ?
     
    Last edited: 18th Aug, 2018
  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    Hope your not taking tax advice from a broker?

    Nothing wrong with that loan set up. maybe convert the LOC to a term loan.
     
  4. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    look maybe at a debt recycle strategy so that by 2021 more than 300 may be deductible ?

    ta
    rolf
     
  5. Will146

    Will146 Member

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    Thank you @Terry_w @MikeLivingTheDream @Rolf Latham. I appreciate you taking the time to get back to me.

    Would I be able to use a debt recycle strategy seeing that I am not actually making any money from my future investment at the moment as it is still currently my PPOR.
    I was hoping that there may be something I could be doing now to potentially increase the loan on my current PPOR (Future investment). I understand from previous threads that this is what everyone wants to do that is in a similar situation & usually it can't be done as it is the purpose of the loan that makes it deductible but I was hoping with the time frame I have I might have something to work with.

    Thanks once again guys:)
     
  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    yes you could.
     
  7. Will146

    Will146 Member

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    Thanks @Terry_w.
    I guess my ultimate question is do you think it would be financially beneficial for me to sit down with a tax investment specialist or just leave the current setup as is.
    I have spoken with my usual accountant but he said just to leave it until settlement which I thought just seemed a bit like he was trying to brush it off.
     
  8. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    its a common prepatory step, sometimes even many years out.

    Seek specific financial and tax advice obviously if going DIY.

    ta

    rolf
     
  9. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    Sorry I thought you mentioned the new main residence will be paid off - in the case it won't be I see why you consider it a mistake now.

    There is virtually nothing you can directly do to change the situation. Indirectly there may be somethings, especially if the main residence is currently owned by one person. see

    Strategy: 11 Strategies for when you move out of the PPOR and keep it Strategy: 11 Strategies for when you move out of the PPOR and keep it

    If any of those strategies could be worth considering then it might be wise to seek legal and/or tax advice to dig deeper.
     
  10. Will146

    Will146 Member

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    Thank you @Terry_w & @Rolf Latham.

    Appreciate you both getting back to me & for your time. You have given me a couple of ideas to try & I will look in to it further trying to implement one of the above strategies.

    Thanks once again & keep up the great work :)