PPOR to IP loan deductibility strategy ...

[bennido]

Like some people, I have made a mistake with my initial loan structure that now makes it quite difficult to switch my PPOR to an IP and still maintain tax deductibility of the loan interest.

My PPOR is valued at about $350K and my loan is $150K with about $50K in redraw.

Lets say, I refinance the loan now (and increase it at the same time to the home value) so that it is ... $350K loan with $50K in an offset account.

Any incomings and outgoings will channel through the offset account with the main loan untouched.

I then leave this alone for a couple of years before I move to a new PPOR.
I then convert the current PPOR into an IP keeping the $350K loan as is.

Would the interest of the $350K be fully deductible now ?

Thanks !

 

[Peter 14.7]

Essentially No.

Sadly this is catch of paying off your PPOR and then moving.

At best. you may be able to refinance the loan back to the original loan amount, not the new value.

But even this can/would be questionable from ATO viewpoint because the new loan is for something other than the house. That is you have the cash to use elsewhere. If you use to reno that ok.

You can sell to another entity like your partner or trust however then you pay stamp duty.

Peter