If i take a loan out as a investment loan but live in the property would i then not pay CGT ?

Discussion in 'Legal Issues' started by HBK, 7th Jun, 2022.

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  1. HBK

    HBK Well-Known Member

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    as the title says , if i take out a investment loan and live in the property for 6 months to not pay CGT would that work ? Or would i have to take the loan out as a ppor loan to be able to do that ?

    My plan is to take a loan out live in the house for 6 months or how long is required to not pay CGT then rent it out and just incase i sell it not have to pay tax because ive lived in it. And a investment loan would let me borrow more then a ppor loan so thats why im asking
    Anyone know here ?
     
  2. Trainee

    Trainee Well-Known Member

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    Why can you borrow more for an investment loan? Because you are telling the lender you will have rental income.

    but if you dont rent it out, have you lied to the lender?

    this is totally separate from whether a property is cgt exempt or not using the 6 year rule.
     
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  3. HBK

    HBK Well-Known Member

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    So i can take out a investment loan live in it for 6 months then rent it out to avoid paying CGT once i sell ?
     
  4. wylie

    wylie Moderator Staff Member

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    Where would you move to after you establish it as your main residence.

    Would you rent elsewhere, or buy elsewhere?
     
  5. HBK

    HBK Well-Known Member

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    I will move and rent somwhere cheaper , this will be my future ppor but i want to not pay CGT if i decide to sell it in the future. So does my plan work ?
     
  6. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Loan types have NOTHING to do with CGT.

    The main residence exemption considers the use of the property as your main residence. 6months initially is fine. Then you can be absent for up to 6 further years depending where you live of course. The house can have a loan or be unembumbered and it doesnt make any difference. Generally a OO loan is cheaper than investment rate..for 6 months. I dont know why you would choose not to tell lender you are occupying ? Then when you move out update it as investor use.
     
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  7. Stoffo

    Stoffo Well-Known Member

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    As per the above.
    The main residence exemption is only ever applicable to one residence/home at a time.
    So if you own other property or intend to within the 6yr period you need to decide which may have more growth/gain.

    The only time that "where you get the money from" is relevant is if it was obtained illegally, in which case you could reside in The Big House :p
     
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  8. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    The name on the loan has nothing to do with how the property or loan is treated for tax purposes. It's just a categorisation by the bank for their reporting purposes.

    If you move into the property, you may want to let the lender know so they can categorise it as owner occupier and give you a better interest rate.
     
  9. money

    money Well-Known Member

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    Curious why banks give better interest rates to owner occupiers? Investor are less risky as they have rental income to help pay the loan, whereas o/o don't and have to pay P&I so are a lot more risky to the banks.
     
  10. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    The banks see it otherwise (and they have the stats to back it up). Owner occupier loans are less risky because people will do almost anything to keep a roof over their own heads, whilst an investment property doesn't have the same attachment.

    As to why they charge more, that only started in 2015. I suspect it's mostly because they can.
     
  11. money

    money Well-Known Member

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    Is it possible these days to get an owner occupier loan as interest only or it must be P&I?
     
  12. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    @money lenders are generally reluctant to allow IO owner occ loans, but there are plenty that will do it. These loans are expensive though, often more expensive that IO investment. I suppose that's intended as a deterrent.