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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:
    117
    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. 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 Tax and Structuring Lawyer Business Member

    Joined:
    18th Jun, 2015
    Posts:
    11,788
    Location:
    Southern Highlands NSW
    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:
    117
    Location:
    VIC
    Many thanks Paul and Terry.