PPOR to Investment

Hello,

I have just finished a build recently and just trying to figure out what to do.

I have demolished my previous PPOR and have built a PPOR and a IP with cash basically. Now i am in a bind as i have been reading through the threads here about deductible and non deductible debt.

I want to unlock the equity in the investment property. Is there anyway to get a mortgage on the IP, take out the funds for personal use and convert the IP mortgage into deductible debt?

 

You would sell and repurchase the property or a variant thereof.

it will potentially be quite costly.

 

Too late. As Ross says you face tax triggers eg CGT, stamp duty etc. If the POOR is in NSW I suggest you contact Terry Waugh regarding the spouse transfer rules which allow a spouse to acquire 50% without paying duty and possibly nil CGT provided you have lived there at least 3 months after completion. It needs legal advice and a broker possibly which Terry can do both and he is good with tax too. However only the PPOR is eligible if you both reside there at the time. The IP isnt eligible.

Otherwise the only way is to acquire a new investment (shares, property etc) and borrow against the PPOR / IP. Its how the $$$ is used that gives deductibility not what the loan security is. If you borrow against the property to produce a further source of income it can be deductible. Best you also get some tax advice on this to avoid pitfalls.

 

Not if you have already completed the project. The interest on any new borrowings against a property would only be deductible if used to invest or produce income.

If you haven't started you can structure this so you could get full deductions

 

Thanks Ross/Paul/Terry for the lightning fast responses!

The IP has already been built so there is no going back.

 

It can be worth considering whether to sell or not. But since you have paid off your non-deductible debt it is not the end of the world. It is not necessarily a bad thing to pay off debt.

 

1. Spouse transfer exemption
2. Use equity for new investment. This may best reflect what would otherwise have occurred and can be tailored. eg Borrow $100K only and use that to buy a portfolio of shares / ETFs etc
3. Sale of some / all property to another person / entity
4. Arms length sale and purchase new investment/s
probably in that order