Buying a house regionally: PPOR vs Investment loan

Genga on 18/01/2022 - 13:16

We are first home buyers looking at purchasing a house, and like many others are considering a move to a regional town. If we can snap ourselves out of our analysis paralysis, we'd like to buy before moving (I know most recommend renting first, but we're confident on the area/schools etc).

I am the principal wage earner, and can work remotely, but wouldn't have anything in writing until I discuss it with my boss, which I don't want to do until we've 100% decided. Husband is a chef, so in theory he could find work easily, but most likely wouldn't be able to arrange anything before moving.

So we're thinking that an investment loan might be the way to go, what I can't find the answer to is how soon you have to move into the property in order to claim as your PPOR and can you do this even if you buy with an investment loan? Does the type of mortgage you take out initially come into play from the ATO's perspective down the track when you want to sell and any cgt implications?

I know there's a 6 month crossover period but we are currently renting, so are not claiming any other residence as a PPOR.

Eg If the house didn't produce an income (perhaps used as a family holiday home) until we're ready to move, is there a time limit on that? Or do you have to move in within 6 or 12 mths etc?

Also understand that an investment loan means we can't claim stamp duty concession, but think the saving would be neglible due to price point.

Home & Garden

Comments

  • life is suffering on 18/01/2022 - 13:24
    -1

    Can also post this in ausfinance Reddit

    • serpserpserp on 18/01/2022 - 14:56

      I will also share my thoughts there.

  • GG57 on 18/01/2022 - 13:41
    +3

    Wouldn't your financier have a say in if the property is deemed to be your PPOR or an investment property?
    For example, if you wanted it to be PPOR, they would expect your current rental expenses to cease (when ascertaining your repayment capacity). If you wanted it to be an investment, wouldn't they expect to see a related income stream?

    • Genga on 18/01/2022 - 14:53

      We have spoken to two brokers over the course of the last 12mths or so with initial enquiries and this is the approach they have suggested when looking to buy either interstate or outside of Sydney (where we currently live). From what I've seen yes they factor in a theoretical income stream for the investment loan scenario, but i guess there's no follow up to see if you actually rent it out (as long as you're meeting repayments).

  • Crow K on 18/01/2022 - 13:51
    +4

    PPOR is a matter of fact based where you live - the name of the loan used to buy the house won't affect it (as far as the ATO is concerned).

    • Seraphin7 on 18/01/2022 - 14:26
      +1

      100% correct.

      You don't get to have a "PPOR loan" … and then rent it out tax free and end up with a CGT-free sale.

      Equally, if you have an "investment loan" … but never accept rental income, never claim property deductions, and don't attempt to claim more than one PPOR at a time, you'll have no problems treating it as a PPOR.

      I know there's a 6 month crossover period but we are currently renting, so are not claiming any other residence as a PPOR.

      See above.

      In your situation, the "new" property would become your PPOR immediately (so long as you are not treating as an investment property). In the context of tax law, a PPOR is only relevant in the context of ownership … your current rental property (in this specific context) is not relevant.

      • Genga on 18/01/2022 - 14:55
        +1

        Yes, I guess it makes sense when you flip it and look at the reverse situation - PPOR loan and then rent it out!

        I guess I was just worried about being caught in a cgt trap if we buy with an investment loan and don't move in straight away!

  • serpserpserp on 18/01/2022 - 15:00

    Husband is a chef, so in theory he could find work easily

    Hmm don't move too remotely. I know trained chefs in country towns that have had to start businesses to get a job, and these are locals that have lived in the area their whole lives (except for some small time away gaining skills).

    • Genga on 18/01/2022 - 15:32

      Absolutely. We're thinking of Port Macquarie, NSW, so a reasonable size. We're planning on having a buffer to cover a gap in employment either way, so should be ok.

  • ef on 18/01/2022 - 15:01

    You can get it as investment loan to max the borrow amount but you pay higher interest rate. You can live in the place as long as your can afford the repayments under an investment loan. Investment home loan is also easier to default and lose the property, if you can't make repayment.
    ATO doesn't care about the type of loan, they care about if you rented it out or if you lived in it.

  • freefall101 on 18/01/2022 - 16:04
    +1

    Might be good to check with an accountant, I've been out of the tax game for a few years, but the rule is that you must live in the house before renting it out to claim PPOR. There's no amount of time you have to live in it but they will check the records (and the ATO have access to rental records, can get bills, etc to prove it, you can't just leave it empty for a week and say you lived in it).

    Once you've lived in it, the 6 year rule kicks in (if you have no other PPOR it can remain your PPOR for up to 6 years, even if your renting it out). But it has to be your PPOR first.

    • godofpizza on 18/01/2022 - 17:57

      oh is the rule 6 years now?

  • askme69 on 18/01/2022 - 19:47

    Great, another one on the move.

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