Just a quick query..
When pre-paying Interest do you need a “Commercial Consideration” i.e Discount..for it to not be seen as Tax Avoidance?
how about rates etc brought into this FY ?
Also what would happen if you purchased a new IP and used additional funds (LOC) to pre-pay Interest BUT got a “Commercial Consideration” (i.e Discount)???????????
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorYou cannot pre pay interest with a LOC. It needs to be a fixed loan. WIth a LOC the interest is charged monthly, so any payment made in one lump sum will just go off the outstanding balance, and then each month interest will be added – and capitalised if you do not pay.
Terryw
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Sorry Redwing, I think I misread your post. You want to pay the interest in advance on a loan by drawing the money for this from a LOC.
A few years ago, you needed to get a discount to be able to claim the interest in advance. The rules have been tightened since then, but it is still possible.
With rates, insurance etc. I think you ca n just bring these forward and pay them without problems.
Terryw
Discover Home Loans
Parramatta
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Just send me a blank email, with “subscribe†in subject line.Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Originally posted by Terryw:Sorry Redwing, I think I misread your post. You want to pay the interest in advance on a loan by drawing the money for this from a LOC.
I was thinking LOC would be best..I have heard of people borrowing the costs of the IP “plus” the first years Interest and pre-paying it..if you cannot claim interest on interest what is the benefit?A few years ago, you needed to get a discount to be able to claim the interest in advance. The rules have been tightened since then, but it is still possible.
That’s what I’ve been led to believe as well..hence the Commercial Conideration, not sure if this is still correct though..maybe one of the accountants can advise?With rates, insurance etc. I think you can just bring these forward and pay them without problems.
I’ve been doing this for years but was told that I needed the C/C or ATO wouldn’t be happY ??Terryw
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Just send me a blank email, with “subscribe†in subject line.Thanks Terry
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow Calculator
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