Hi folks, Well I am going to seek tax advise on my question but I'd like to check if my situation makes sense to you and see if I am posing the right questions. I am living in my PPOR. I have one IP. I am moving into my IP at the end of this year. My loans are like this: Loan 1: 200k (secured against PPOR. I have 100% debt-recycled Loan 1 to buy $200k worth of Vanguard ETFs. So Loan 1 is fully tax deductible.) Loan 2: 350k (secured against PPOR. This is equity release from PPOR used to purchase IP) Loan 3: 450k (secured against IP only) Now when I move into my IP later this year, Loan 3 will become non-tax deductible. I believe I would have to SELL the Vanguard ETFs I purchased by debt recycling Loan 1, pay CGT on the gains I've made, use the remaining proceeds to again debt recyle a significant chunk of non-tax deductible Loan 3. If I do the above, would Loan 1 still be tax deductible? My understanding is: Loan 1 was used to buy ETFs. I've sold the ETFs now and used the proceeds to debt-recycle Loan 3. Um..what becomes of Loan 1 now? *scratches head* Finally, since I dislike selling & paying CGT, is there a clever way to automagically transfer $200k worth of debt recycling done for Loan 1 to Loan 3 without me selling ETFs and paying CGT? Hope that made sense. Thanks a lot!
thanks for the reply, Terry. Do you mean, if I want to start debt recycle Loan 3, I will have to start afresh with new money basically. Loan 1 and its associated ETFs stays as is (i shouldnt sell) to maintain Loan1's tax deductibility. I had a quick peek at part IVA and it's beyond me, i will seek tax advise.
Why would this change, it's purpose is investment? This will become non-deductible if you move into the IP. What will you be doing with this property (sell or lease) What was the purpose of this loan? This may become non-deductible if you move into the IP and the funds were used for it's purchase.
There is no requirement to sell the shares to debt recycle in all cases. However if its the source of funds to discharge the loan then yes its required. If there is another source of funds however it can be avoided.
thanks Paul. I am not looking to discharge Loan 1. All I am looking for is to simply maximise the total sum of tax-deductible loans after I move into my IP in a few months time. Right now, all my loans are tax deductible. However when I move into my IP, Loan 2 and 3 will be non-taxdeductible. I understand that. I was wondering whats the way to turn Loan 1 (which is my fully debt recycled PPOR loan) to remain tax deductible after I sell the ETFs and use sale proceeds to freshly debt recycle Loan 2 or 3. If the above is not possible, when I move into IP, and if I dont sell those ETF boought via Loan 1, my situation will be: Loan 1 will tax deductible (purpose of the loan to buy ETFs) Loan 2 and 3 will be non-tax deducitible (purpose of the loan was to purchase the property which is now my PPOR) What I am looking for is: Loan 1 to be tax deductible (somehow convert this to a Investment property loan) Loan 2 will be non-tax deductible. It will be untouched. Loan 3 - I debt recycle a portion of Loan 3 from the sale of ETFs bought previously using Loan 1, rest of the Loan 3 will be non-tax deductible. Thanks for your time @Scott No Mates
Look at my tips on loan recycling. You will have to reuse the loan to purchase income producing assets. Once you sell an asset any loan used to buy that asset will no longer be deductible interest, with one minor exception - I have written a tax tip on that too.
