Go Back  British Expats > Living & Moving Abroad > Australia
Reload this Page >

Tax Question on Investment Properties in Australia

Tax Question on Investment Properties in Australia

Old Mar 2nd 2015, 5:04 am
  #1  
now just Shaun...
Thread Starter
 
Shaun&Dee's Avatar
 
Joined: May 2005
Posts: 483
Shaun&Dee has a brilliant futureShaun&Dee has a brilliant futureShaun&Dee has a brilliant futureShaun&Dee has a brilliant futureShaun&Dee has a brilliant futureShaun&Dee has a brilliant futureShaun&Dee has a brilliant future
Default Tax Question on Investment Properties in Australia

Hi all
I have a loan of $400k secured against a property valued at $450k, which is my primary residence. LVR 89%.

To avoid mortgage insurance I have secured an investment property valued at $300k with no mortgage owing against the loan also. This makes the LVR 53%, which is under 80% to avoid the insurance.

I am going to make a payment of $40k against the mortgage in order to bring the LVR under 80% and remove the investment property from the mortgage. I am then going to use this investment property to obtain finance on a further investment property.

If I borrow the $40k to pay off against my principle home loan, is the interest tax deductible on this $40k?

Any thoughts?
Thanks
Shaun&Dee is offline  
Old Mar 2nd 2015, 5:27 am
  #2  
MODERATOR
 
old.sparkles's Avatar
 
Joined: Sep 2009
Location: slough - Adelaide
Posts: 27,375
old.sparkles has a reputation beyond reputeold.sparkles has a reputation beyond reputeold.sparkles has a reputation beyond reputeold.sparkles has a reputation beyond reputeold.sparkles has a reputation beyond reputeold.sparkles has a reputation beyond reputeold.sparkles has a reputation beyond reputeold.sparkles has a reputation beyond reputeold.sparkles has a reputation beyond reputeold.sparkles has a reputation beyond reputeold.sparkles has a reputation beyond repute
Default Re: Tax Question on Investment Properties in Australia

Originally Posted by Shaun&Dee View Post
Hi all
I have a loan of $400k secured against a property valued at $450k, which is my primary residence. LVR 89%.

To avoid mortgage insurance I have secured an investment property valued at $300k with no mortgage owing against the loan also. This makes the LVR 53%, which is under 80% to avoid the insurance.

I am going to make a payment of $40k against the mortgage in order to bring the LVR under 80% and remove the investment property from the mortgage. I am then going to use this investment property to obtain finance on a further investment property.

If I borrow the $40k to pay off against my principle home loan, is the interest tax deductible on this $40k?

Any thoughts?
Thanks
I don't know if it is or it isn't but why would you think it might be?
old.sparkles is offline  
Old Mar 2nd 2015, 5:43 am
  #3  
now just Shaun...
Thread Starter
 
Shaun&Dee's Avatar
 
Joined: May 2005
Posts: 483
Shaun&Dee has a brilliant futureShaun&Dee has a brilliant futureShaun&Dee has a brilliant futureShaun&Dee has a brilliant futureShaun&Dee has a brilliant futureShaun&Dee has a brilliant futureShaun&Dee has a brilliant future
Default Re: Tax Question on Investment Properties in Australia

I'm thinking it would be because the only reason I'm borrowing the $40k is to secure the further investment with a better rate.

What works against it is that the $40k loan is not being used for an income producing asset.
Shaun&Dee is offline  
Old Mar 2nd 2015, 6:15 am
  #4  
MODERATOR
 
old.sparkles's Avatar
 
Joined: Sep 2009
Location: slough - Adelaide
Posts: 27,375
old.sparkles has a reputation beyond reputeold.sparkles has a reputation beyond reputeold.sparkles has a reputation beyond reputeold.sparkles has a reputation beyond reputeold.sparkles has a reputation beyond reputeold.sparkles has a reputation beyond reputeold.sparkles has a reputation beyond reputeold.sparkles has a reputation beyond reputeold.sparkles has a reputation beyond reputeold.sparkles has a reputation beyond reputeold.sparkles has a reputation beyond repute
Default Re: Tax Question on Investment Properties in Australia

Originally Posted by Shaun&Dee View Post
I'm thinking it would be because the only reason I'm borrowing the $40k is to secure the further investment with a better rate.

What works against it is that the $40k loan is not being used for an income producing asset.
There was me thinking the only reason you were borrowing 40K was to avoid paying LMI on your own mortgage.

If you're offered up 750K in assets, can't you mortgage them to 600k's worth and keep at the 80% rate - that would give you some cash for further investments.
old.sparkles is offline  
Old Mar 2nd 2015, 8:06 am
  #5  
Forum Regular
 
Joined: Jan 2011
Location: Brisbane, Australia
Posts: 92
Craig Vaughan is a name known to allCraig Vaughan is a name known to allCraig Vaughan is a name known to allCraig Vaughan is a name known to allCraig Vaughan is a name known to allCraig Vaughan is a name known to allCraig Vaughan is a name known to allCraig Vaughan is a name known to allCraig Vaughan is a name known to allCraig Vaughan is a name known to allCraig Vaughan is a name known to all
Default Re: Tax Question on Investment Properties in Australia

Originally Posted by Shaun&Dee View Post
I'm thinking it would be because the only reason I'm borrowing the $40k is to secure the further investment with a better rate.

What works against it is that the $40k loan is not being used for an income producing asset.
That is correct - tax is all about purpose. The purpose of that 40k is to pay off your PPR and therefore not deductible.

However, come to buy your next property, if you borrow funds against you current investment to cover 20% plus costs on your new property, those funds will be deductible to you as the purpose was to buy an income producing asset.

You definitely want to uncross your properties and keep them separate loan/s per property. Ie, each loan to only have one security, not linking your PPR to your investment properties etc etc.

All the best.
Craig Vaughan is offline  
Old Mar 2nd 2015, 9:44 am
  #6  
Concierge
 
spouse of scouse's Avatar
 
Joined: Jan 2013
Location: Western Australia
Posts: 17,421
spouse of scouse has a reputation beyond reputespouse of scouse has a reputation beyond reputespouse of scouse has a reputation beyond reputespouse of scouse has a reputation beyond reputespouse of scouse has a reputation beyond reputespouse of scouse has a reputation beyond reputespouse of scouse has a reputation beyond reputespouse of scouse has a reputation beyond reputespouse of scouse has a reputation beyond reputespouse of scouse has a reputation beyond reputespouse of scouse has a reputation beyond repute
Default Re: Tax Question on Investment Properties in Australia

Originally Posted by Shaun&Dee View Post
Hi all
I have a loan of $400k secured against a property valued at $450k, which is my primary residence. LVR 89%.

To avoid mortgage insurance I have secured an investment property valued at $300k with no mortgage owing against the loan also. This makes the LVR 53%, which is under 80% to avoid the insurance.

I am going to make a payment of $40k against the mortgage in order to bring the LVR under 80% and remove the investment property from the mortgage. I am then going to use this investment property to obtain finance on a further investment property.

If I borrow the $40k to pay off against my principle home loan, is the interest tax deductible on this $40k?

Any thoughts?
Thanks
With the amount of wheeling and dealing you're doing, I think you're mad if you don't have a good tax accountant!
spouse of scouse is offline  
Old Mar 2nd 2015, 7:36 pm
  #7  
BE Enthusiast
 
Joined: Feb 2014
Posts: 592
john in oz has a reputation beyond reputejohn in oz has a reputation beyond reputejohn in oz has a reputation beyond reputejohn in oz has a reputation beyond reputejohn in oz has a reputation beyond reputejohn in oz has a reputation beyond reputejohn in oz has a reputation beyond reputejohn in oz has a reputation beyond reputejohn in oz has a reputation beyond reputejohn in oz has a reputation beyond reputejohn in oz has a reputation beyond repute
Default Re: Tax Question on Investment Properties in Australia

Finance broker and adviser here. I have seen many continue to borrow at high levels using available equity in their homes and other properties. Without knowing your full situation it can become a high risk strategy because if anything goes wrong you place yourself in jeopardy of losing one or more houses. You normally need very high levels of income to support this and have good cash reserves especially if you are reliant on rental incomes to support your strategy.

Sometimes paying down the debt initially to put yourself in a stronger financial position is best.

If you wish to discuss your loan and future loan structure, current finances or your strategy then let me know.

I hope the above helps with the above comments from others.
john in oz is offline  

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Contact Us - Archive - Advertising - Cookie Policy - Privacy Statement - Terms of Service - Do Not Sell My Personal Information -

Copyright © 2021 MH Sub I, LLC dba Internet Brands. All rights reserved. Use of this site indicates your consent to the Terms of Use.