Buy New Unit For Tax Break
Sun Herald
Saturday August 17, 1996
* I HAVE an investment unit which I have paid off. I have recently bought a house to live in and have a $190,000 mortgage. Can I refinance this mortgage so that the mortgage is on the unit, allowing me to negatively gear the loan?
B H, Kareela
When a loan is taken out, the interest paid is deductible if the money is invested with the intention of producing assessable income.
If you take a new loan out on your investment unit and use it to pay off your home loan, you are not investing the money to produce income.
The situation is a not uncommon and anyone who has a mortgage for both their own home and an investment property is generally better off by concentrating on paying off their own mortgage first.
Only when that is gone should you begin to repay the capital on the investment loan. In your case, you would not have the choice if you bought your home many years later than your investment unit.
If you desperately want to claim a deduction for a property loan, then you can sell your home unit and put any profits towards your home loan and hopefully pay it off.
Then you can buy a new investment property and take out a loan specifically for that purpose.
It is an expensive process when all costs are taken into account and you will need to calculate whether it is worth your while.
© 1996 Sun Herald