PPOR or IP? Please help!

Discussion in 'Investment Strategy' started by andrewhutchens, 5th Mar, 2020.

Join Australia's most dynamic and respected property investment community
  1. andrewhutchens

    andrewhutchens New Member

    5th Mar, 2020
    My wife + I purchased our first house in Hobart in 2018 fully intending it to be our PPOR, however due to her still having 6 months left on her employment contract in Launceston, we initially rented out the house for 6 months to the sellers, before moving in. I'm trying to work out whether the house is considered our PPOR as we moved in as soon as was practicable or whether because we rented it out initially it's now considered an investment property for tax purposes?

    We have sinced moved again for work purposes and so my main reason for asking is I want to increase my owners occupier mortgage on the house (as has gone up in value $100k) in order to use as a deposit to purchase another house to move into, and turn the current house into an IP. If my house is considered a PPOR I know I can increase my mortgage no worries, but if it's considered an IP I'm not allowed to increase my mortgage for personal use and claim the increased interest repayments as a deduction.
  2. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

    15th Aug, 2005
    Gold Coast
    Pls seek tax and credit advice

    No, any equity pull for a new PPOR wont be deductible because it fails the purpose test

  3. croseks

    croseks Well-Known Member

    9th Oct, 2018
    It was first your IP, then when you moved into it it became your PPOR. It is still your PPOR now until you move into another house.

    Take Rolf's advice ^^ and speak to your accountant and a mortgage broker on how to move forward :)
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

    9th Jun, 2006
    Australia wide

    It doesn't matter whether it is considered a PPOR or not. What matters is whether the main residence exemption could apply for CGT. If you rented it out after settlement then it was not your main residence. You didn't move in as soon as practical. But if you did move in, it could be the main residence, for CGT, after that point. The full exemption could never apply, but it could still be sold CGT free potentially.

    Deductibility will depend on whether the money borrowed was used to fund an income producing asset. Security for the loan doesn't matter. If you borrow against the main residence and use those funds for a new main residence the interest could only be deductible if the new main residence was rented.