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best strategy to manage capital loss

Discussion in 'General Investing Discussion' started by Scotty, 18th Feb, 2008.

  1. Scotty

    Scotty Member

    Joined:
    6th Aug, 2006
    Posts:
    18
    Location:
    Pheasants Nest,NSW
    Any advice would be welcome.

    I want to sell an IP in NSW that is costing me way too much. I can offset an estimated capital loss of 40k against my capital gains ok but obviously the bank will want the loan fully re-paid. I have enough cash to fund that type of loss but would prefer to use that cash as part of my renovation cost on PPOR.

    Advice on the best strategy for this would be helpful. I have quite a bit of equity available. Do you think it's possible to use part of my equity and pay the loss of with a tax deductible loan?

    Thanks for comments.
     
  2. Rob G.

    Rob G. Well-Known Member

    Joined:
    6th Jun, 2007
    Posts:
    717
    Location:
    Melbourne, VIC
    You need to get some advice specific to exact situation.

    Theoretically, you can continue claiming deductions for loans still existing after ceasing an income-producing activity (i.e. provided the property was a rental one).

    However, as you might guess, the ATO will scrutinise the details as they will be unhappy.

    Where you voluntarily keep a loan active then they will look at whether there is another purpose - such as a private nature.

    You need to reasonably argue that you will be financially stretched, or that you are using your other funds for income-producing activities.

    Check with your Accountant before refinancing the loan as well.

    Cheers,

    Rob
     
  3. Billv

    Billv Getting there

    Joined:
    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW
    Good question, I am sure you can borrow from your existing equity and pay the bank but I am not sure if you can claim the interest after you sell the IP.
    I am guessing that you will still be able to claim it but ask your accountant.
    Cheers
     
  4. Scotty

    Scotty Member

    Joined:
    6th Aug, 2006
    Posts:
    18
    Location:
    Pheasants Nest,NSW
    Thanks for your input Rob.

    Looks like I will consult with my accountant before deciding what to do next.

    Scotty




     
  5. Scotty

    Scotty Member

    Joined:
    6th Aug, 2006
    Posts:
    18
    Location:
    Pheasants Nest,NSW
    Thanks for your input too BV.

    I will seek my accountants opinion.

    Cheers.

    Scotty