Home' API Magazine : August 2014 Contents 14
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¿ TRANSFERRING DEBT
QIf you have a $800,000 mortgage on a
residential principal place of residence
(PPOR) valued at $1.2 million, as well as an
investment property valued at $650,000
with no mortgage that’s rented to a family
member for $800 per month, can you
transfer $650,000 of the debt from the
PPOR onto the investment property and
start claiming it as a tax deduction to reduce
your taxable income?
AThe short answer is no. The rule is
that the interest on a loan is only
tax-deductible if the borrowed funds are
used in relation to an income-producing
property. It doesn’t matter where the loan
is secured. Further you can’t negatively
gear a rental property when you’re charging
below market rent to relatives. Crunch the
numbers, you may be better off to sell the
¿ SMSF PROPERTY INVESTMENT
QIf a self-managed superannuation
fund (SMSF) already owns a block
of land outright, can an individual – who
also happens to be a trustee and member
of the fund – loan money to the fund to
build a spec home on the land with the
intention of selling on completion? Also,
once the home is sold, can the SMSF then
repay the loan plus interest and retain any
profit after paying tax? This strategy is an
alternative to contributing money to the
fund that’s then locked in. If it’s allowable,
can it be achieved by SMSF minutes or does
it require something more complex and
formal to be established?
ASMSFs can’t borrow to improve an asset
(reference Self-Managed Superannuation
Funds Ruling (SMSFR) 2012/1). That’s
the only problem with this arrangement.
For example, if you organised to buy an
established house, or a house and land
package where the property only transferred
to the SMSF upon completion instead, then
you have a great plan. It’s certainly better
to lend to your SMSF than make a non-
concessional contribution that’s locked in.
You can’t charge above market interest
rates. You can certainly charge less than
market rates and this is probably a good idea
unless you need the interest income. Why
take it from the SMSF, which would only
pay 15 per cent tax on it and then include
it in your tax return at your marginal rate? I
recommend that you don’t lend more than
80 per cent of the security.
You’ll need professional advice to set up the
arrangement, proper loan documents and a
bare trust to hold the property.
Julia Hartman is a CPA, registered
tax agent and founder of BAN TACS
Accountants Pty Ltd.
If you have a tax question you’d like answered,
please send it in 100 words or less to
This information is of a general nature only and does
not constitute professional advice. You must seek
professional advice in relation to your particular
circumstances before acting. This information is also
to be read subject to the disclaimer on page 6.
Tax Straight Up
with Julia Hartman
NSW First Home Owners Grant changes
First homebuyers in New South Wales planning to make the most of a $15,000 grant for
new property are now able to spend a little extra.
The threshold for the grant has been increased from $650,000 to $750,000 in the
2014/15 NSW Budget.
This means any first homebuyer who purchases a new property up the value of
$750,000 would be entitled to the grant.
“The latest figures show the number of grants has increased significantly over the past
financial year,” NSW Treasurer Andrew Constance says.
“First homeowner grants for new homes are 46 per cent higher in the four months to
April 2014, compared to the same period the year before.”
However, it will be harder to get the $5000 New Home Grant from July 1.
The $15,000 grant is available for first homebuyers of new property, whereas the $5000
is available for anyone who purchases new property. However, the $5000 grant will soon
be restricted to Australian citizens and permanent residents only.
It will also be restricted to one grant per person, per year.
the lights on
In this month’s issue of Australian Property
Investor we uncover some little-known
but ultimately rather ridiculous property
laws (see page 64).
And one of these is a law in New South
Wales about what does, and what doesn’t,
constitute a bedroom.
Jane Slack-Smith of Your Property
Success came across this obscure
regulation at a NSW renovation course.
“We were talking about converting
a two-bedroom property into a three-
bedroom property and someone said
they’d been told there has to be natural
light coming into the bedroom, hence you
can’t just close off a room in the middle
of the house and say ‘here’s a bedroom’,”
But is it true or false? API asked the
Australian Building Codes Board to shed
some light on this (pun intended) and...
“The National Construction Code
requires a habitable room, which would
include a bedroom, to be provided with
natural light, either directly by a window
or roof light in the room, or indirectly
through an opening or glazed panel from
an adjoining room which has a window or
roof light of sufficient size to serve both
rooms,” deputy general manager Trent
So the next time you see a Sydney
property advertised with a cupboard
masquerading as a bedroom, you’ll have
the law on your side when you hopefully
negotiate down the price.
ON THE LIGHTER SIDE
Of renters are annoyed
by unresponsive property
Housing Sentiment report
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