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How shall I calculate interest deduction for IP?

Discussion in 'Accounting & Tax' started by Ouchmyknees, 4th Oct, 2016.

  1. Ouchmyknees

    Ouchmyknees Well-Known Member

    Joined:
    30th Aug, 2016
    Posts:
    83
    Location:
    VIC
    Hello everyone, much appreciated if you can kindly help with my situation:

    I bought my ppor (cost is 600k) in July 2014 with a one-year fixed loan (after one year the loan will become a variable rate one), mortgage was 480k, interest rate was 5%.

    One year later in July 2015 when the fixed rate period has passed I refinanced the loan to a variable one, the ppor was revalued at 620k, the mortgage became 496k, the released equity of 16k was put to the offset account. New interest rate is 4%.

    Another year has passed in July 2016 I turned the ppor into a IP. I’m a bit unsure how should I calculate the interest deduction for this IP? Should I use 480k*4%? How about the money in the offset account?


    Another problem is, when I lived in the ppor, I rented out the car space for 200 per month, can I still enjoy the 6 year absent rule given I used the ppor for profit (although the profit is very small.)


    Many thanks for your collective wisdom in advance!
     
  2. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,358
    Location:
    Sydney
    There should be no 2016 tax impacts as the property was a main residence
    The garage income is assessable income...Perhaps some deductions based on apportioning ?

    In 2017 if the offset is used ($16K) then apportioning of the loan into two purposes may be required

    The receipt of income does affect a 100% CGT exemption in the future.
     
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  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,957
    Location:
    Sydney
    Mixed purpose loan
    480/496 x 100 = 96.77%

    97% should be deductible assuming it is IO and no other withdrawals or deposits were made.
     
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  4. Ouchmyknees

    Ouchmyknees Well-Known Member

    Joined:
    30th Aug, 2016
    Posts:
    83
    Location:
    VIC
    Many thanks Paul and Terry.