PPOR into IP

Discussion in 'Loans & Mortgage Brokers' started by dannnnn, 19th Jun, 2017.

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  1. dannnnn

    dannnnn New Member

    Joined:
    17th Mar, 2016
    Posts:
    4
    Location:
    Brisbane
    Hi All,

    My wife and I own 50/50 an apartment in QLD we purchased in 2012 for $500k and borrowed $400k. We subsequently refinanced in 2015 at a valuation of $535k, borrowed 80%/$428k and carried out some renovations costing about $25k.

    We have a young family and need to buy a bigger property. We want to keep the apartment, pull as much equity out as possible to fund the new house and claim as much on possible against my tax as my wife only works part time.

    Can anyone give me some pointers? :)

    Thanks for your help!

    Dan
     
    dannnnn, 19th Jun, 2017
    #1
  2. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

    Joined:
    18th Jun, 2015
    Posts:
    3,980
    Location:
    Canberra, Brisbane and Sunshine Coast
    Hey Dan

    Set up the equity release as a second loan. It needs to be separate from the existing loan so you can distinguish between deductible and non deductible debt.

    You might want to consider keeping investment debt as IO - and P&I against the equity release and new PPOR loan.

    If your current loan is variable - it might be worthwhile getting a couple of valuations done. One might come back higher than the other which will enable you to release more equity.

    Having said all that - I'm not an accountant so seek pro advice on taxation stuff.

    Cheers

    Jamie
     
    Jamie Moore, 19th Jun, 2017
    #2
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  3. Eugene82

    Eugene82 Well-Known Member

    Joined:
    2nd Oct, 2015
    Posts:
    57
    Location:
    NSW
    Hi Dan,

    Sorry just to clarify. You live in the apartment at the moment? It's your primary place of residence? Have you payed any of it off? Or do you have an offset account? Search the forum for threads on converting PPOR to IP.

    Cheers
     
    Eugene82, 19th Jun, 2017
    #3
  4. Paul@PAS

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

    Joined:
    18th Jun, 2015
    Posts:
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    Location:
    Sydney
    Any equity released needs to be split and will not be deductible if the new loan is to help buy the new home. The old loan seems 100% against the former home and would be limited to the $425K as deductible.

    s118-192 would also apply and the market value the former home first produces income becomes its costbase for CGT thereafter. Jamies tip on vals would also apply to this...Choose a higher one for CGT

    There may be strategies to change ownership of the property immediately prior to the moving out and get concessions for duty. This may also need refinance on the home. Worth exploring perhaps so that the 50/50 ownership doesnt have a detrimental tax impact. See legal advice on that. Daryl at RPI / certus may be a good adviser if you need that legal support.
     
    Paul@PAS, 20th Jun, 2017
    #4