澳洲Australia property PPOR - Convert to IP or Sell? | Sydney


在澳大利亚 The pool at of an IP needs to be resurfaced (or so the pool doctor says), the cost was estimated to be $10K ($10,000), after recoverying from my impresssion of a cat coughing up a fur ball, it just seems far too much. Its just a standard poo I need some advice regarding a property purchase. Property - semi-detached house Bedrooms - 2 Condition - average needs internal reno to modernise Street - one of the best in suburb Location - excellent Close to schools - yes Transport - 50m


Say the time comes that we want to upgrade from our current PPOR. I know it's a very subjective question but is it better to sell it or convert it to IP?

Apparently, proceeds from selling your PPOR will not attract any tax - tax free money that is. Is this true? :confused:

While if you convert it to IP and then decide to sell it later anyway, then proceeds will be taxed.

Thoughts?
Thanks! :)  

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How much do you owe on the PPOR?

I mention this as many discover that money they have paid back to date on the loan can't be drawn back out without tax implications.

The Y-man  

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Hi Y-Man,

We still owe quite a lot at this stage and have some redraw available. Not going to take action immediately but just thought I would raise this question.
What do you mean by "can't be drawn back without tax implications"?

Thanks.  

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Parlayman,

A property is exempt from CGT while it is your PPOR (and possibly longer if you claim the 6 year rule). If you then convert it to a IP, you will need to get a valuation at the time it converts as CGT will be due for capital growth from this point onwards.

Normally the interest on the loan that you used to purchase this place (PPOR turning into IP) would become tax deductable when you convert it to the IP - however you may have contaminated the loan by making extra repayments and redraws.

How has your current loan been setup? Redraw or offset facility? If redraw, have you made a lot of extra repayments and redrawn amounts? If so, what have you used the redraws for?

Regards,

Jason  

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Hi Jason,

It's currently redraw but we're thinking of changing it to an offset. We've done quite a few repayments and very minimal redraw - which was used for personal expenses I would say.

Thanks.  

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parlayman said: ↑
Hi Jason,

It's currently redraw but we're thinking of changing it to an offset. We've done quite a few repayments and very minimal redraw - which was used for personal expenses I would say.

Thanks.Click to expand...
This is what Y-Man meant with "can't be redrawn without tax implications". Only the interest of the outstanding balance of the loan will be tax deductible. You will have a loan against an investment that includes some personal drawings... very messy.

The actual numbers might make a difference, but in the absence of such, I would suggest sell and re-purchase may be simpler.  

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parlayman said: ↑
Hi Jason,

It's currently redraw but we're thinking of changing it to an offset. We've done quite a few repayments and very minimal redraw - which was used for personal expenses I would say.

Thanks.Click to expand...
Too late for the existing money, but good for future. Ideally you should have had this set up initially before paying any extra into the loan.  

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Thanks all for your inputs.
We might end up refinancing our current loan and will probably do 100% offset. So try and cover both ways whether we sell it or convert to IP in the future. At least that's how I understand it.  

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