No, definately not.

Many people get caught on this. Take this "extreme" example...

$300,000 Mortgage
A friend lends you $200,000 for 2 months, you place it in the mortgage account, the balance drops to $100,000. You then redraw the $200,000 and the balance goes back up to $300,000.

But now, the ATO only allow repayments on the $100,000 to be tax deductible !

Another example, one that really happens, is that some people use a Portfolio type loan for investment and personal use.

A $300,000 investment loan but with a personal income going in every month of say $5,000, and $5,000 of personal expenses going out each month, plus rent of $2,000 going in and mortgage interest of $2,000 going out.

The balance stays the same at $300,000, but the tax man will see it reducing by that $5,000 every month. After 5 years, the mortgage has become totally non tax deductible.

Not fair, but those are the rules, and all accountants should advise clients accordingly.

It's apparently very tax efficient rather than mad.

It'll be on the ATO website somewhere under CGT. If you don't buy another property then you are exempt from CGT if you sell within 6 years of moving out.

Are they relatively new rules then? I'm sure that wasnt the position back in the early to mid 90's.

How do people release the equity then from their investment property to purchase another? I thought that was the main way of doing it.

Are you sure it's equity release from their investment property rather than their PPR? I'm not entirely au fait with the mechanisms employed by negatively geared property investors. But I would think it would make more sense to borrow against the wholly owned investment property using it as collateral rather than do an equity release.

thank you I will check it out.

I wonder if anyone can answer my original question re the references, do you still need to provide references when renting a property?

Proof of home ownership should be enough. They can't ask you to provide references for rentals you haven't had. How long have you been an owner occupier? They may just require extra character references or something. Call an agent and ask.

Just get someone who knows you to provide a phone reference, that should be sufficient.

Also if you are going to use an agent to help you rent out your property, they may be able to give you a reference saying that your home is in good repair etc
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thanks yeah I will ask the agent we are using what they would need in that scenerio.

If the money is used to buy another investment property then those funds can be used for tax purposes on the new property.

I am not sure how long the rules have been like that, but definitely since at least 2003, when I found out about it.