Tax implications of swapping IP and PPOR over.

Discussion in 'Accounting & Tax' started by Dan Donoghue, 3rd Feb, 2017.

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  1. Dan Donoghue

    Dan Donoghue Well-Known Member

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    OK So I made some mistakes in the past (Paying my PPOR right down). Then I met you guys and got a good broker to help me restructure.

    Since that time created an offset against the PPOR and did some funky stuff with the loan (which I will not pretend to understand).

    I ended up with:

    P&I on PPOR of 170K
    Offset on PPOR with 355K in it
    IO loan against the offset on the PPOR with -355K in it.

    This 355K was then used for a large deposit and buying costs ie stamp duty and stuff towards purchasing an IP.

    Now I have ended up with this scenario:

    PPOR P&I 168K owing
    PPOR IO 315K owing
    IP 616K owing

    The loan against the PPOR is sitting around 60% LVR and the IP around 68%

    This would all work just fine if I would stay put but my problem is, I want to move into the IP and make the PPOR an IP.

    With regards to tax, what is my best way to do this? my time frame will be around 12 months so plenty of time to work it all out and do what I need to do.

    I am not keen on the idea of getting rid of my PPOR as it's in Sydney and if I leave the Sydney market I may struggle to get back in however I do understand that that would "tax wise" completely solve my problem as I could put all the CGT free moneys from that into an offset against my old IP / new PPOR. If that is the only option then that is obviously what I will do but if I can hold on to my old PPOR then I would like to (Current PPOR in Sydney, current IP in Gold Coast).
     
    Dan Donoghue, 3rd Feb, 2017
    #1
  2. Terry_w

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

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    Is the PPOR jointly owned?

    If you rent the PPOR only the interest on the $168k loan would be deductible and only if there has never been any redraws or money taken out.

    See this other thread where Jackie made a mistake thinking you could increase the loan before moving out and claim the interest:
    Negative Gearing - Tax Question
     
    Terry_w, 3rd Feb, 2017
    #2
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  3. Dan Donoghue

    Dan Donoghue Well-Known Member

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    The PPOR is jointly owned, the IP is in my name only. Is there something we could possibly do there with transferring it to my name only?
     
    Dan Donoghue, 3rd Feb, 2017
    #3
  4. Terry_w

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

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    Not without stamp duty. But may be worth considering one of you borrowing to buy out hte other and borrowing to do so.
     
    Terry_w, 3rd Feb, 2017
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  5. Dan Donoghue

    Dan Donoghue Well-Known Member

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    Thanks Terry, I will look into that, I think I may come unstuck with serviceability but we will see.

    Thanks again
     
    Dan Donoghue, 3rd Feb, 2017
    #5
    Terry_w likes this.
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