May 20, 2016

Buying a new principal place of residence and making the old one tax deductible

Home loan Account is $440,000 (This is the original loan amount you took to purchase your home at that time) $440,000
100% Offset account balance is $200,000 (which is all money you saved up and deposited), and you now choose to withdraw $200,000 and use all money for personal use, in this case to buy your new home to live in, your offset account balance will be $0.00 on that day. Less $200,000 = $0.00

Thus interest payments will be calculated on the balance which will be the whole loan amount of $440,000

Once you rent your old home, the interest on $440,000 will be tax deductable. Equals $440,000


Another great example and more significant benefits of a 100 percent offset account; is that you can use the money in your 100 percent offset account (which needs to be all money you saved up and deposited into the offset) can be used to buy a NEW principal place of residence (PPR), which means your NEW home.

So now you have decided to buy another home for yourself to live in, you have spoken to Money Elements and have all your finances in place, you’ve gone out in the market place and found the home you want to buy, the twist in this example is that you have chosen to keep your existing home and convert it into an investment property and want to rent it.

Converting your existing home to an investment property

Using the example above, showing your existing home loan balance of $440,000, and having managed to save over a period of time $200,000 in your 100 percent offset account (the amount of money is irrelevant, it’s the concept that matters here), (refer back to my earlier posts/blogs to understand more about how a100% offset accounts work)…what happens here is that you can use your $200,000.00 towards your NEW HOME, and then your old home loan interest repayments, on the loan amount of $440,000.00 are tax deductable as soon as you old home is rented.

The tax law says (in my words) that you can only claim up to the balance owing on your ORIGINAL home loan or the original home loan amount you have on the property,  if none of the principal has been paid, as in your case, you are now able to claim the interest payments on the whole $440,000.00, because, again, just to be clear, you have been depositing your money in the 100 percent offset and have not been paying down your mortgage, or in other words you have not paid any money off the principal… what you have done is minimised your interest payments, as you now know.

(as explained on The Money Elements Report M.E.R.C.)

So, by having the loan structure as shown on “The Money Elements Report M.E.R.C.”, you are now able to claim the interest amount on the $440,000.00 and all other expenses that go with a rental property.

Build Your Wealth Guys, I’m here to help you on the journey.



Our open minded and strategical approach will grow your business without limits

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top