Converting PPOR to IP

Hey guys,
Looking for a bit of advice or reassurance around loan structure when converting my poor to IP to maximize deductibility.
Currently, I have it setup as below:
Loan 1(with offset) - $250k P&I (secured against current poor)
Loan 2 - $150k IO (secured against current poor but used for deposit on IP1
Loan 3 - $500k IO (secured against IP1)
I'm looking to rent elsewhere and lease out my current poor and wondering if PC community thinks the structure below is the right way to go about it:
Loan 1(with offset) - $400k IO (secured against current poor; to be IP1)
Loan 2 - merged into loan 1
Loan 3 - $500k IO (secured against IP2)
Any advice would be great
Cheers

 

Why merge the loans?

 

Mainly to keep it simple, when the time comes to buy next IP/PPOR I plan to draw down from funds in the offset account against loan 1

 

I can't see why you would merge your Loan 2 (which was used for IP1) with Loan 1 (which will now become IP2). This merged loan would be for 2 separate properties. Although their purpose is the same (investment) and most probably deductible (speak to your tax adviser to confirm) I would presume your accountant would be annoyed at this setup.

I would keep them separate. It will be easier to see what loan is for what property this way & will make your rental property schedule easier in your tax return simpler to complete in my opinion when trying to work out interest paid for the tax year.

 

Why are you changing the structure of the loans? I can understand switching to IO but unless I'm missing something you're better off keeping all three loans.

 

This tip may also be relevant

Tax Tip 173: Strategy – Don’t rely of a lender’s valuation for CGT Purposes Tax Tip 173: Strategy – Don’t rely of a lender’s valuation for CGT Purposes

 

Possibly the naming convention is a bit off but let's not rename IP1 (existing) to IP2 (once you change your PPOR to IP).

I'm presuming your "Loan 1 & Loan 2" are from the same lender. Is this one loan but split? Or another product with the lender? I have something similar with my lender where it's split. There's no need to consolidate and merge them in to 1 other than better management. The other possible reason is because you're renting, your offset may get larger than the split loan, that's when you want to merge them back and take advantage of the offset portion. Sometimes merging and splitting later down the track will cost another fee.
Changing something from P&I to IO may cause a serviceability check. What if you could pay down some principal and use that split to draw equity and use that deposit for another IP?
This is under the assumption it's a split loan like mine. If it was a completely different product under the same lender, I would expect more fees?