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How to arrange finances for best tax benefits

Discussion in 'General Investing Discussion' started by keithm, 15th Jun, 2009.

  1. keithm

    keithm New Member

    Joined:
    7th Sep, 2006
    Posts:
    1
    Location:
    Bowral, NSW
    Hi everyone, it's been a long time since I have visited and things have been hectic.
    We are now looking at moving to a new area but do not want to sell our home (we vowed never to sell again). However I am confused about how to structure finances to get the best tax breaks. If we rent the current home out and buy a new one do we end up with a huge non-deductible debt on the new one and a small deductible debt on the old? Plus income we can't offset?
    Current place, approx value $380K, owe $160K. Looking at buying in the $400-450K market. Rent on current place should be about $400pw.
    Would it be simpler to sell the current place, buy a new one with a small mortgage and then start again on investment property ending up with a small non-deductible debt and fully deductible debt on the IPs?
    Does that make sense?
    keith
     
  2. FinSpec

    FinSpec Member

    Joined:
    15th Jun, 2009
    Posts:
    16
    Location:
    Sydney
    Hi Keith,

    There are some structures that you can use that will allow you to keep your old house and make it tax efficient, however it really does depend on your own personal financial situation - income, other assets, cash flows etc. about 70% I've seen it work well, the rest of the time you're better off selling - so it's really down to your particulars. PM me if you like or post more on here.
     
  3. GregR

    GregR Reid Consultants

    Joined:
    13th Jul, 2009
    Posts:
    273
    Location:
    Berwick Vic
    Keith,
    It will depend on long term goals and the balance of owning a PPOR to renting. I have clients in similar circumstances, they refinanced their existing PPOR, set up a new equity line of $140k or so, use part to fund the deposit of a new IP and borrow from another lender, effectively 105% LVR. You then rent yourselves. You now have 2 IP's and depending on name, income levels etc. you could get some tax benefits. It will depend on whose name the PPOR is in, what income levels etc.

    It also depends on your need to live in your own PPOR as compared to renting a place to live for a period of time.
    You could sell your existing PPOR but there are significant lost costs and you did say you did not intend to sell again. What I would do is put down some numbers, see what is the most effective.
    Good luck
     
  4. jrc

    jrc Active Member

    Joined:
    3rd May, 2007
    Posts:
    32
    Location:
    Western, NSW
    If you're moving to a new area for work it might be possible to arrange your salary package so that sale costs and purchase costs come from your pre tax income.