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  • Profile photo of amsaini15amsaini15
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    @amsaini15
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    Post Count: 64
    July 28, 2010 - 8:43 am
    Terryw wrote:
    Do you have a separate loan for the equity release? If not you should

    Terry Just another question on this one…..
    I recently requested equity increase of $45200 from my PPOR lender. I have setted up separate loan of $32,000 to be used as 10% deposit for my IP purchase and mixed the remaining $13,200 into my existing PPOR loan amount. Have I done something wrong. Should I have settled up another loan account of $13200 to be used for my 2nd IP purchase.
    OR i have to request alteration to the loan structure again and separate this $13,200 as deposit for 2nd IP purchase.

    To give me tax-deductibilty on this amount how does ATO distinguishes whether its the same equity increased amount ($13,200) or I have just used my offset to put money back into my loan account and re-created new account with same amount for tax-deduction (to fund IP purchase)?

    Is there any rule to follow or I can just restructure PPOR loan and create new loan account to pay off for 10% deposit on IP purchase and claim deduction on that separate loan account?

    Please advise. Thanks

    Profile photo of amsaini15amsaini15
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    July 22, 2010 - 4:55 am
    Trev wrote:
    Hi amsaini, the two properties are negatively geared.  The rental pays off part of the interest payments and the remaining interest debt accumulates. 

    I wasn't sure if you can let remaining interest debt to accumulate while directing all payments into PPOR loan as ATO will see this as a scheme where we are paying off non-tax deductible debt while letting tax-deductible debt to grow. So if you have this arrangement, without the private ruling, you would not be able to claim deductions on increased interest component of your loan?

    Terryw wrote:
    Yes, it is possible in Australia. Some have applied for private rulings and been successful. You just have to be careful that you are not doing it as a scheme to avoid tax.

    Terryw

    Terryw, I would believe the only purpose of interest capitalisation is to claim more deductions while paying off your PPOR. What can be another reason for this to explain ATO? Thanks

    Profile photo of amsaini15amsaini15
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    @amsaini15
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    July 22, 2010 - 3:33 am

    I think you still have to pay interest on an IO loan. Trev, how could the size of your IO loan increase if you still pay your interest .

    Terryw, Is it possible to setup loan in such a way to let Interest capitalize and direct all income and rent into PPOR loan. I asked my accountant and he advised this would not be possible in Australia (Possible in US)

    Thanks

    Profile photo of amsaini15amsaini15
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    June 14, 2010 - 1:35 pm

    Thanks Paul.. Very good explaination. I have to now think about it if I want to keep it different from 50-50.

    Profile photo of amsaini15amsaini15
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    @amsaini15
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    June 14, 2010 - 11:22 am

    Thanks Sandra !! Much appreciated.

    Profile photo of amsaini15amsaini15
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    @amsaini15
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    June 14, 2010 - 10:06 am

    Thanks Greg for the detailed explaination. I am going with the IO loan with the offset. Thanks for the confirmation that this arrangement is  fully funding the IP purchase.

    Profile photo of amsaini15amsaini15
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    @amsaini15
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    June 11, 2010 - 1:37 pm
    SandraL wrote:
    Amsaini,

    I think you should be able to set up an LOC with your existing lender (MyRate) to access the equity on your PPOR. This then becomes the deposit for your IP. You can then take out a new loan for your IP with CBA or whoever you like. The interest on the LOC will be tax-deductible, since its purpose is the IP. So a pretty good outcome if you can set it up that way!  

    Sandra,
     When you say "This then becomes the deposit for your IP."  Does this mean my loan amount will be 80% or 90% for the IP. This will defeat the aim of having 100% loan amt for maximum negative gearing benefit? I do have extra cash as deposit as well but I donot want to pay any deposit for maximum benefits.

    "The interest on the LOC will be tax-deductible, since its purpose is the IP."  – Does this mean even if I have paid for the deposit on the IP through LOC, I am still able to claim tax benefit of the deposited amount virtually making my loan 100% tax deductible? Please excuse me I have misunderstood it.

    Profile photo of amsaini15amsaini15
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    @amsaini15
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    June 11, 2010 - 12:45 pm

    Thanks everybody for the solution. Now the tough decision that I have to make is whether I can trust Myrate to process breakup faster so that I can have both loan with CBA or if I have to stay with MyRate at 7.1% LOC loan.

    CBA lender was telling me some lenders take long time (5-6 weeks to process the transfer of loan) which would put me in trouble as I would just have 42 days for loan settlement..

    Profile photo of amsaini15amsaini15
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    @amsaini15
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    June 6, 2010 - 11:07 pm

    Thanks duckster and DD.

    @duckster – I have now subscribed to the Australian Property Investor Magazine for 12 months. As you said, I think this will help me get more understanding of the current situation.

    @dd – Thanks for the detailed info. I can see you have a good understanding of this area.

    I am keeping an eye on the market but it seems house prices are rising too quickly to my liking :)

    Profile photo of amsaini15amsaini15
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    May 25, 2010 - 2:40 pm

    Thanks Richard, I will email you as soon as I have property of interest.

    Cheers
    Aman

    Profile photo of amsaini15amsaini15
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    @amsaini15
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    May 24, 2010 - 3:33 pm

    Forgot to add my email address – [email protected]

    Thanks
    Aman

    Profile photo of amsaini15amsaini15
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    May 24, 2010 - 3:32 pm

    Hi Richard
             Thanks for your help. I do not have exact address of the property but I am looking to buy in Glendenning (2761) and Plumpton (2761) in NSW. I am interested in suburb profile and/or recent sale data of these ones. This would be my first IP so any information about vacancy rate and possible rent information would be great.

    Thanks a lot

    Profile photo of amsaini15amsaini15
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    May 21, 2010 - 9:42 am

    Thanks Guys !! Much appreciated. You all are Legend.

    Profile photo of amsaini15amsaini15
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    @amsaini15
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    May 19, 2010 - 2:20 pm

    Not sure why you paid large deposit for investment property. you should have saved your deposit and let the property be negatively geared. I am new to all this but this is what I learned so far. To have 100% loan to make it negatively geared for claiming. What do you say guys?

Viewing 14 posts - 41 through 54 (of 54 total)
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