If we are buying a PPOR with the intention of converting it to an IP after a couple of years, is there any disadvantage to having an IO loan with offset?
This would be the best way to set it up. Check out the posts that QLD007 has made on this forum, he has covered this information heaps of times. i think you can search for posts by particular members. cheers Sonya
Hi Singer,
You're asking exactly the question I should have years ago when I bought my first PPOR! I fell into the "trap" of not planning ahead, and putting measures in place for when I moved out & it became an IP.
For the years I lived there, I happily paid P+I+extra repayments into the loan account (no offset). When I came to move out, I suddenly realised I'd done myself a disservice by paying into the loan account, as opposed to an offset … because I couldn't redraw all those extra payments & then claim the resulting interest against my income. If I had used an offset, I believe I could have done that & the ATO would have been happy, because the loan figure wouldn't have been affected when I "cleaned out" the offset account…which could have been used for better purposes, such as deposit on my 2nd property.
Good luck! You're doing the right thing by looking to structure things properly NOW, rather than later.
Yes, best not to have any loans PI unless you cannot control your spending.
Rob – wonder how much tax you could have saved? – sorry, no use cryiing over split milk, but good for others to learn.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks for that.
It's because I've been reading Richard's and Terry's posts that made the light bulb go off, but it seems that there are only advantages and I was thinking that surely there'd have to be some disadvantages. Good to know there isn't. I'll go for it.
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