Negetive Gearing for a House Already Paid for

Solario31 on 23/06/2020 - 15:59

Hi,

Just trying to understand if this is something I can do.
I got a property in Sydney, which I paid in full and generating rent.
I also bought a house in Perth, which I live in, and paying a mortgage for.
Is there a way I could switch the mortgage so that the mortgage cost will come out of my tax?

The other option I was thinking was to buy a new home for renting(in Perth) and shift all the mortgage over there(to get the negative gearing). I'm hoping to do this with the new 25K bonus recently announced.
Does this makes sense and can be done?

Thanks

Financial

Comments

  • ThithLord on 23/06/2020 - 16:06
    +26

    Man, can't get enough from the Taxpayers teat, huh?

    • mskeggs on 23/06/2020 - 18:40
      +2

      Why wouldn’t you want an investment that makes a loss every month?

  • Porker on 23/06/2020 - 16:13

    Speak to your bank. Although, they're unlikely to transfer mortgages like you want them to. It's different if both have a mortgage and you're just shifting around excess funds (offset balance)

    Rather than pay off my investment mortgages, I have offset accounts against each that are fully topped up to the mortgage amount. I then withdraw from those offset accounts when I need access to money, and then that interest incurred is then tax deducted.

    I personally don't want my primary residence to be in debt as my bank defaults to me paying principle and interest on that type of loan. You should priorise paying this off over investments as none of the repayments/interest are tax deductable.

    The repayment of principle and interest is also likely more out of pocket expense than interest only for an investment property.

    Lots of variables and methods to achieve what you want, but lots of missing info to. For example, depending on the type of loan for the investment, you may be able to redraw or access a line of credit (via equity loan). But there may be limitations on what you can do with that money in terms of whether that newly incurred mortgage debt is deductable or not. Eg, you cant just get an equity loan and buy a new car, and then tax deduct the loan interest.

    But if you buy another investment property, just don't pay that off and then all the profits/losses over all your properties will be calculated.

  • [Deactivated] on 23/06/2020 - 16:19
    +10

    No you cannot. The loan would not be for income producing, cant shift those costs on to tax payer. You'll need another loan against the paid for house and use it to invest in an incoming producing asset ie new investment property shares

  • Donaldhump on 23/06/2020 - 16:39

    nope, thats why u never pay a house off IMHO

  • Seraphin7 on 23/06/2020 - 17:02

    In short, no.

    To effectively do what you are getting at, you need to buy a property (this may your PPOR) and pay back as little of the loan as is possible (noting that putting money into the offset account is not paying it back).

    Then, when you want to move to your next property, you take the money out of the offset on the first to buy the second (along with any additional borrowed funds).

    At this point, the first property can become an investment property and the interest associated with the loan for it becomes tax deductable.

  • TheMindsetTraveller on 23/06/2020 - 17:39

    Generally you can't just switch over debt and use it for a tax advantage.

    What you can do is buy a third property for investment only purposes, or sell the Sydney property to upsize to a bigger/better property and add on extra debt, the new debt component becomes for investment purposes.

  • Ocker on 23/06/2020 - 17:40

    Are you married, and if so is the Sydney property in joint names?

    • Solario31 on 23/06/2020 - 19:07

      I'm married - but only written on my name as I bought it before I got married.

      • apptrack on 23/06/2020 - 23:57
        -2

        Got a prenup? Otherwise by now it's in both names..

  • ihbh on 23/06/2020 - 18:09
    +4

    Move into your Sydney property and rent out the Perth one.

    • Solario31 on 23/06/2020 - 19:07
      -1

      Yeah don't think I can do it as my work is in Perth.

  • Tyrx on 23/06/2020 - 20:43
    +2

    If you're keen with the concept of losing money on your investments, I can bill you $2000 per month - that way you can claim back 45% of that figure come tax time! Bargain.

  • Quantumcat on 23/06/2020 - 21:08
    +1

    Sell the Sydney property, pay off your Perth house, then buy a new house to have as an investment. Then that mortgage can use negative gearing. If not able to pay off the Perth house completely, then pump all your money into paying off the Perth house (since you can't negatively gear that) and go interest only on the investment one.

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