New IP loan - plan to convert to PPOR later

Hi guys, is there anything I need to keep in mind in getting a loan set up for an IP that we plan to move into in a couple of years? Have it as interest only, put extra money into the offset, then change it to principle and interest when we move in? I've read a bit about the other way around, not much this way. I know there's probably a reason... CGT. I'm guessing we should wait to do any improvements until after we moved in.
Should we just set it up as P&I from the start?

 

Think ahead and plan carefully the name or names it will be in. This could allow for some spousal transferring strategies later.

Not much really on the loan side. Try to start off with 80% LVR on the bank loan, possibly borrowing 104% using another loan secured by other property. Keep cash in offset on current main residence and move it to this one once living in it.

House will be subject to CGT based on time period owned. The longer you live in it the lower the % subject to CGT will be. Loans don't effect CGT directly but just keep a record of your interest and other costs while it will be a main residence as this can be used to reduce CGT. Keep all receipts forwever - and give them to your executor on death.

 

Thanks for the detailed reply @Terry_w , much appreciated.
I'll do some research into names and such.

 

Great point! hadn't thought of adding this to the long "just-in-case" list

 

Hmmm... Is it worth getting a valuation when moving into the property as well, or is the CGT only ever calculated on a % of time rented versus owned?

We are in the exact same position, and are about to move into our IP as we have sold our PPOR. We are currently renovating the IP before moving in, so how does that factor into the CGT calculations when selling, as the renovation will certainly increase value and we don't want to pay CGT on that.

Thank you
vtt

 

when moving into a rental valuation doesnt matter as CGT is worked out on a % basis.

Keep a record of all costs incurred as you can claim most off the CGT when you sell

 

What about if you don't plan on selling?

 

Statistics show 95% of people die at some point (+/- 5%).

Circumstances change too.

 

Ha, very good. I mean do you pay CGT when you convert it from IP to PPOR, then claim CGT discount when you sell?
I don't care what happens after I die

 

Only pay CGT if it is sold. Same after death too - no CGT on inheritance, only when sold.

 

Ok, thanks Terry.
So if we go with IP at 1st, and do some improvements, does that effect anything when we move in or only if we sell?
If we convert back to an IP at some stage, CGT isn't a factor, only if we sell? Like IP-PPOR-IP.

 

Tax will only be payable if the property is sold. Just keep all records so you can minimise the tax.

 

Thanks for the quick replies @Terry_w