Selling an IP which was used for deposits on other IPs

Discussion in 'Accounting & Tax' started by devank, 24th Jul, 2015.

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  1. devank

    devank Well-Known Member

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    Hi,

    We used IP1 to draw deposits for other IPs (lets say IP2). We had about 400K loan on IP1. Took 200K from IP1 as deposit for IP2. We claimed the interest for 200K against IP2.

    Now, what happens if we sell IP1? I assume that we lose the deductibility of that 200K as it is wiped out when we sell the IP1.

    How can we better manage tax deductibility?
    Should we pay part of the loan using the profits and draw again for investment purpose?
     
    Last edited: 24th Jul, 2015
    devank, 24th Jul, 2015
    #1
  2. Terry_w

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

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    If you paid off the loan you would lose deductibility of interest, but if you refinced that portion, after splitting you wouldn't.

    See my post on mixed loans and tax issues too.
     
    Terry_w, 24th Jul, 2015
    #2
  3. devank

    devank Well-Known Member

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    So what you are saying is that I should split the 600K loan on IP1 into 400K & 200K. Then refinance the 200K before selling the IP1. Is that right?
     
    devank, 24th Jul, 2015
    #3
  4. Terry_w

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

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    Terry_w, 24th Jul, 2015
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  5. Paul@PAS

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

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    Most likely but as Terry said...seek advice. Tax, mortgage broker etc. In some instances the bank wont give you a choice. You heard about cross collaterised property... This could be an example.
     
    Paul@PAS, 24th Jul, 2015
    #5
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