Browse Forums Home Finance 1 Apr 26, 2010 7:50 pm Hi there, I've just signed a contract to purchase a home with a partner (as tenants in common) and I intend to move into it in 7 months time (my half of loan will be $200k). My partner is moving in on settlement day (30 days) & we'll find a boarder to rent the spare room until I move in & it becomes my PPoR & will probably remain so for, say, 8 years. I currently live in my own home and owe $140k on it, but in addition I have $70k excess monies paid & available in redraw (which makes the loan balance $70k). I have lived in it over 5 years and will rent out this home when I leave in 7 months, therefore it will become my investment property. I am wondering how best to organise my finances regarding the loans. I am also planning to move to a different lender simply because of a better deal available. To take advantage of tax deductions on the interest on my (soon to be) investment property, I believe I should redraw the $70k excess and use it to help reduce my loan in the new PPoR, thus leaving my existing loan owing $140k. Does anyone know if the ATO would reject the $70k redraw as a tax deduction on interest? (I suppose I can ring them tomorrow!) Regardless, does anyone have any other advice how I could arrange my loans to my advantage please? Or is there anything else regarding the loans that I might need to consider please? Re: Changing principal place of residence finance query 2Apr 26, 2010 9:46 pm Am guessing the $70k is not in an offset account and has effectively reduced your loan balance. If this is the case, whether you can claim the interest on the $70k you take out will depend on what those funds are used for when you take them out. Eg if you use the funds on your new PPR, then no you cannot claim the interest(as you are using the funds for a private purpose), however if you were to use the funds to buy shares you could claim the interest as a deduction against the shares. If the funds are in an offset account you can draw the funds out and claim the interest in full as you never decreased your loan balance you only decreased the amount of money you were paying interest on. I have always made a point to never put any extra funds into a loan to decrease it's balance, instead I use an offset account. I do this for the above reason primarily. I do suggest you give the ATO a call tomorrow to confirm your situation. Re: Changing principal place of residence finance query 3Apr 26, 2010 11:11 pm Hi Zac, Go see an accountant and expain your situation. Unfortunately they will most probably say that if you are using the $70k for private use, no tax benifiet as 75etd suggests. The other thing you may want to mention is what you are planning in regard to getting a boarder in to rent the spare room out. It may get a little confusing but while you can get drepreciation for that 7 months, when you eventually sell it you will be up for a certain amount of capital gains tax. You may be able to get around it using the 6 year rule however your accountant will need to discuss this with you. Glen 2 7184 There is no reason why building contract reconciliation cannot be done prior to handover, if the builder won't do it get someone to do it for you. Why would you pay for… 3 6682 you were just referred to get advice from your solicitor. This is a legal matter. Separately, why would you use a buyers agent for a house and land package? 3 56034 |