Refinancing PPOR ahead of turning it into a rental

Hi there. We plan to move out of our PPOR in about a year, after which we will rent it out. We want to refinance this year to release some equity for various things, including a refresh of the appliances, fixtures and fittings in the house. Question- if we refinance now while still living here, then later rent it out, can we claim the interest on the whole loan, or only part of it?

 

You can only claim interest on the loan from when it becomes a rental property, not before then.

Once the property is a rental, the interest on whatever money was borrowed for the purchase of the property, or it's refurbishment, will likely be deductible.

 

Part of it. Only the interest on the portion of the loan that relates to the property purchase.
It is likely you will also have a mixed purpose loan too,.

 

Also consider the timing of the refresh of appliances etc, as this will likely impact your future depreciation deductions.

 

The impact of s118-192 which resets the property costbase and the choice of using the main residence exemption absence rule should also be understood.

The replacement of appliances will not be depreciable if it is done while you still live there. Only if new appliances are installed after you move out. eg If the property has an existing AC it cant be depreciated when rental commences as it is used.

It may assist to get a QS report prepared. The QS can guide including the replacements etc