Does loan type (OO/IP) affect CGT?

Just say I have a PPOR with a OO P+I loan then decide to change it to investment property. I shouldn't have to pay CGT if I have rented it for too long (6 year rule or whatever)

If I buy an investment property with a interest only loan then live in it for a year or two (as ppor), then rent it out for a few years, I should be able to be cgt exempt as above. But will the fact that the loan was investment loan in the first place affect cgt calculation?

 

The loan type wouldnt matter for CGT purposes i didnt think.

However, if you've told the bank its an investment but plan is to actually live in it, then weren't you fraudulent on your application?

 

The loan type is something made up by the banks to make you pay more interest if you're an investor. I'm not aware of it having any affect on how the ATO treats you, I believe that's dictated by how you use the money you've borrowed.

For specific advice on how you'll be taxed, consult your accountant.

 

No. However if the ATO did want to select property for datamatching you could fall into a profile for review. They would likely realise the data wont correlate. Lenders themselves had no idea until a few years ago. But the nature of the source of money or its description or even its deductibility etc wont have a single issue with CGT.

CGT is based on an ownership interest and whether the property is exempt, partly exempt or the way its calculated. And the CGT issue is self assessment based and subject to ato review or audit.

 

Thanks guys

 

The information you provide to lenders will be indicative evidence of your intention.

If you take out a 2 year interest only loan with a cashflow showing the loan will be repaid by the sale of the property once you have renovated it you are potentially showing that the property is a development property.

However the most likely answer to your question is no. The biggest indicator of an investment asset is that it is held for a long period of time.

 

Maybe.....just maybe.

I have seen people take out resi loans for commercial purposes. And profit making intent on CGT potential devs. Agree that disclosure can incriminate but not always clear. A risk averse intention that you "could" sell does not evidence a profit making intention.. That could be a mere realisation.

A early evident tax plan is a good strategy