Hi All, I'm looking for some guidance around my property and tax. Here's my current situation: Recently bought a $800k house with a mortgage of $600k - P/I at 3.24% with ANZ over 30 years This is my PPOR but I do plan to rent it out if I decide to move overseas for a year or two. I also plan to buy a bigger house to move into when I start a family in 8-10 years time. The current property will then switch to an investment property. Upon settlement, my parents decided to move $460k into the redraw The intention was to help me save interest and it was a better option than leaving it in term deposits. In return, I am funding their living expenses as a form of 'interest'. However, this now means that my loan has been contaminated and I won't be able to claim tax deductions on the $460k when I rent out the house in the future. I also can't redraw this $460k to invest because my parents are retirees and this is outside their risk appetite. I have requested the bank to take the monthly installments from the redraw instead of my savings account to minimise interest. For the last 2 months, I have been depositing my monthly salary into the redraw (again to minimise interest) and also withdrew once to pay for a credit card statement ($3k) I plan to refinance next year since the only reason I'm with ANZ right now is because of a recent promotion they had with 300k Qantas Points and the chance to win $500k off my home loan. The chance for $500k will be in the form of a lottery in 4 months time so I won't be refinancing until then (unless I win of course!) My questions now are: Should I continue depositing my monthly salary into the redraw to save interest? I'm worried I will further contaminate the loan but it might be beyond saving at this point. If I don't deposit my monthly salary, what should I do with it instead? I'm a big fan of investing in ETFs but I'm worried about the transaction costs each month (I usually do buy once a year). Should I ever redraw again? I already accessed the redraw once to pay a credit card statement (only $3k taken out). Should I stop using the redraw like an offset account? I'm worried about further contaminating the loan. Should I refinance? Is it worth refinancing in 4 months time? The current loan with ANZ doesn't have an offset and the interest rate is also much higher than some cheaper competitors (e.g. TicToc, Freedom, etc.). The main benefit of ANZ is that I've been a long-term customer and live close to a branch. What should I do when I rent my property out in the short-medium term with the intention of moving back in 1-2 years later? Is it possible to convert the property to an investment property for 1-2 years and claim back the interest in tax deductions or is it not worth it? Is there anything I can do right now to prepare for this? (e.g. splitting my loan?) What should I do when I turn my property into an investment property in 8-10 years time? Given my loan would be contaminated, I think my best option is to sell the property to my spouse. No stamp duty would apply given the property is in VIC and also no CGT would apply given it's a PPOR and I've only rented it out for 1-2 years. My spouse can borrow against the property and the interest will now be tax deductible. The funds I get from the property sale can be put into the mortgage for my new PPOR and I can redraw to invest into ETFs. Does this sound like a good plan? When I sell the property to my spouse, should this be below, at or above market value? I was thinking below market value to minimise interest but I believe most banks would do some sort of valuation on the property before settlement. Since stamp duty and CGT won't apply, are there any other transaction costs that I should be aware of? Appreciate your help in advance!
You should stop chasing marketing rates and offers, sit down with someone who will take into account your personal goals and help you get there. There are so many flaws in what you have done already.
You should seek personal advice. You "may" have borrowed $$ from your parents and need to refinance this and give it back. Smells like a scheme to avoid income tax by parents and you now have a problem. They may also miss out of Centrelink benefits etc over the next 5 years or so. The tax issues concerning your possible move also need to be understood. Moving o/seas for a year of two may mean double tax issues to consider.
Someone just doesn’t decide to ‘move money’ into someone else’s bank account. It was either a gift or a loan from your parents. It is not ‘in the redraw’ but in the loan, where you might have the possibility of being able to redraw it. If it was a loan you could just withdraw the money and give it back. It doesn’t necessarily mean the loan is contaminated or that you won’t be able to claim the interest. It also doesn’t mean you cannot use it to invest, unless it was a condition of their loan perhaps. Sounds like you are capitalising the interest on the loan now. Redrawing to pay the credit card probably contaminated the loan. I don’t like ‘should I’ type questions, but … 1. It would be better to use an offset account to deposit wages 2. I wouldn’t redraw other than to pay the parents back, or invest 3. Depends 4. You would certainly want to claim the interest on the loan when investing. 5. Stamp duty would apply if you sell to your spouse and the property is in VIC seek legal advice
The money is a gift from my parents. I just don't want to invest it in anything high risk because I'm treating it as an emergency fund (e.g. major surgery). 1. Sounds like I won't deposit wages until I refinance to a new loan with an offset. Alternatively, should I change the monthly repayments to draw from my savings account (where my wages are paid) instead of reducing the redraw amount? Is there a difference? 2. Makes sense 3. Depends on what? Can you give me a situation where it would be beneficial to refinance? 4. Any ideas how much interest I'll be able to claim given my loan has been contaminated? For my current situation, I have made $460k additional repayments and have withdrew $3k. The outstanding loan is around $143k. If I only make monthly repayments for the next 4 months and then refinance to a new loan with an offset, what proportion of the loan can I claim interest on? Would it be the loan amount outstanding at the time minus the $460k? 5. You're right. I just read one of your tax tips that talk about the recent changes to stamp duty in VIC for spousal transfers. With that said, sounds like I should still do it given the tax benefits in the long run. Any recommendations on who I could speak to?
Your loan that relates to the property appears to be $140k so you could probably claim 140/143 of the interest incurred on the current loan. about 98% If redrawing split the loan to avoid mixed loans going forward
