Assuming old PPOR will be transferred to Investment property, and outstanding balance for that old PPOR is fully offset.
Is it financially correct that the offset amount is taken out from that old PPOR to purchase a new PPOR and then to claim the interest for the old PPOR (which is now an investment property) when you lodge tax return (among strata levies, council rates, maintenance, …)
Thx!
Agree with bemybubble. Get professional advise.
Few things to look out for is do not contaminated the loan.
And with tax return, you can claim depreciation of the building which requires a depreciation schedule.
Agree 100%. Paying $500 to set this up correctly with an accountant could save 10's of thousands of ATO headaches down the track. A perfect scenario where being a tight arse is not the best move.
Please get financial assistance - I had a colleague who for want of not completing a simple Notice of Intent to claim for Super lost $67,000 in tax.
Your $5 Xmas gift will help ease the pain. Thank you for your service. 😉
Nope according to you - $8.00 for a Bluetooth speaker - but it WAS a colleague - so no condolences with a Christmas gift this year!
Standard OP posting for financial advice on a bargain site to save money… In that case do what you want and if it is illegal then you are up the creek with no boat.
Great thanks for the link, appreciated
Caution, I read the other day that ATO Community has been giving out incorrect advices. Not sure if true, but don't trust blindly what someone random posted on a forum.
It’s true. It’s not as accurate as what it should be. And if they get it wrong and you rely on advice from there it will however work in favour to avoid penalty, but not change the outcome
Yes. The loan now pertains to an income-generating asset so you can write off the interest on it. Offset moneys (which have nothing to do with the loan) go into new PPOR mortgage and all your future money goes into new PPOR mortgage, keeping the IP mortgage as big as possible while paying down your non-deductible debt.
Cheers mate, this is what I was after, makes sense!
accountants are tax deductable for the purposes of helping you structure investments……or an investment property.
The correct forum to ask this question is https://www.propertychat.com.au/community/forums/accounting-…
Thx bud for the link, great!
Terry tax tips are awsome, go through those.
Yes. Any interest on your now investment property will be deductible.
Put your offset cash against you're new place
I believe you are free the withdraw money in the offset for any purpose, and can claim interest on the existing loan provided the funds were used to purchase/improve property 1 (former PPOR/new IP).
But as others have said, get some advice to prevent any issues. Have you ever refinanced or used funds from that loan for any other purpose? That could cause an issue, there are probably other things to consider also.
No this is not tax deductible.
It is the purpose of the loan that makes it tax deductible not how you use it. The original purpose is PPOR - non tax deductible but spend a few bucks and get this told to you by another accountant independent of this group
Youre right in that it's what the funds are used for that determines deductibility.
In this case the borrowed funds were used to purchase the property that was used as a PPOR. That property is still subject to that loan and given its about to be a IP the interest will be deductible.
The purpose is correct, but it becomes an IP so the interest becomes tax deductible (but the CGT exemption removal clock also starts running). Provided the funds are coming from an offset and not a redraw, this is okay as the purpose of the funds from the offset are to purchase the PPOR, not the loan itself (whereas if you redraw, the purpose of the money being redrawn is to buy a new PPOR so the existing loan is being used to buy the new PPOR).
I am an accountant, but I am not your accountant, so this information is general. Deductibility of funds is in connection with their use. Hence money from a loan which is used to purchase a property is deductible to the extent the property is connected to an income earning venture.
Whilst it is your PPR it is not tax deductible. Once it becomes your investment property, interest on the loan is.
How does an offset account interact with this? As the offset account is separate to your loan account, the loan remains untainted from a use of funds perspective. The offset account merely allows for the outstanding loan balance to be offset by the amount in the offset account, reducing interest payable. When the funds are removed from the offset account, the loan is no longer offset, so the interest payable on the loan increases accordingly.
One point to be very aware of is that a redraw facility operates very differently. As a redraw is part of the loan, deductibility of any redrawn amounts is dependent upon the use of the funds. For example if the funds drawn are to buy a new PPR, the loan would be non-deductible rather than in the previous case with the utilisation of funds from the offset account. Effectively the redrawn amounts are a new loan. A line of credit operates in a similar manner.
Another point to be aware of is that security for a loan has absolutely no bearing on deductibility of the loan; it is the use of the funds that matters.
Great advice!, deductibility is relevant to use, won’t forget that statement, thx
This. I have done what you're doing quite a few times and in both directions - so from PPOR to IP and then back to PPOR, with a few properties - and I've never had a problem with the ATO. Anything in the offset is yours to deploy as you wish. A redraw facility though is not the same thing and this is generally where folk get unstuck.
Don't worry about paying for advice. If you want to double check, call the ATO hotline and speak to the them directly. You can change the purpose of your original loan. Sleep easy.
Get tax advice from an accountant who specialises with property.
With rentals being a focus area don’t muck around…