Use equity in IP for deposit on PPoR

Discussion in 'Loans & Mortgage Brokers' started by White Rabbit, 17th Apr, 2017.

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  1. White Rabbit

    White Rabbit New Member

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    Hello all,

    I'm currently looking for a property to live in. I have an investment property that I own outright and would like to use the equity for a deposit. My broker said I can use the equity and still claim the interest back as a tax deduction, but I don't believe this is right. I was of the understanding that I could only claim the interest back if I used the equity for investment related purposes. I was considering selling the IP, but don't want to be waiting around for it to sell before I can look for the PPoR.

    Ideally I would like to keep the IP and be able to claim tax deductions. I earn quite a high income and having a positively geared IP is, as you can imagine, keeping the ATO very happy!

    My question is can the loan for the PPoR be structured so I can use the equity in the IP for a deposit and still be able to claim tax deductions? Or have I backed myself into a corner with this one?

    Thanks in advance for any replies :)
     
    White Rabbit, 17th Apr, 2017
    #1
  2. Terry_w

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

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    Not deductible.

    Report the broker to the tax agents board!
     
    Terry_w, 17th Apr, 2017
    #2
  3. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

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    Your broker is incorrect, but it's not the end of the world - you might like to look at employing a debt recycling strategy to reduce the new PPOR debt and increase deductible. It takes a bit longer but better than borrowing 100% for the new PPOR and not being able to deduct any of it.
     
    Jess Peletier, 17th Apr, 2017
    #3
  4. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Your broker is wrong :-(

    You can use the equity - not an issue there....but you won't be able to claim the interest deductions.

    Cheers

    Jamie
     
    Jamie Moore, 17th Apr, 2017
    #4
  5. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Subject to serviceability and a few other things, a spousal sale ( depending on who owns the asset now) and a well managed AND on-going debt recycling strategy may make your broker part right.

    ta
    rolf
     
    Rolf Latham, 17th Apr, 2017
    #5
  6. albanga

    albanga Well-Known Member

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    Sorry I might have got lost in this thread but what tax deduction?
    You own the IP outright so your not paying any interest to deduct?
     
    albanga, 18th Apr, 2017
    #6
  7. Paul@PAS

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

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    Yes if the property is in Vic a spousal sale and refinance may be a smart solution.
    And a new broker.

    I believe Rolf just demonstrated the difference between good v bad
     
    Paul@PAS, 18th Apr, 2017
    #7
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