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  • Profile photo of auhealthauhealth
    Participant
    @auhealth
    Join Date: 2011
    Post Count: 6
    September 1, 2011 - 2:06 pm

    Hi, guys

    Thank you so much for helping me understand the problems and providing me the solution. I understand that one mistake I make now may cost me thousands in the future. Just wanna make sure that I do it right and advice from experienced investors are the best!

    I need to talk to the bank to rearrange me loans first as you guys recommended.

    Best regards,
    SydneyRental

    Profile photo of auhealthauhealth
    Participant
    @auhealth
    Join Date: 2011
    Post Count: 6
    September 1, 2011 - 12:33 am
    Qlds007 wrote:
    Hi SR

    The ATO apply the "Purpose Test" irrespective of the security used to obtain the loan so as i have posted many times before you could secure the new sub loan of $100K on the security of a pogo stick and if the funds were to be used for investment the interest would be deductible.

    You would link the offset account to the non deductible debt portion of the PPOR loan and then have your income and IP rents etc paid into the offset account…

    Richard/Terryw,

    Thank you for replying.

    Without splitting the PPOR loan, can I link the offset account to the non deductible debt portion?

    I haven't touched the $100K since I applied for the TOP UP. The money is still in PPOR loan with the original $300K. Is there a way to fix the problem, or it is too late besause the money has been contaminated? Can I now ask bank to split the PPOR loan into two (one for $300K and one $100K) before I take the next step to use the $100K for investment?

    Regards,
    SydneyRental

    Profile photo of auhealthauhealth
    Participant
    @auhealth
    Join Date: 2011
    Post Count: 6
    August 31, 2011 - 3:10 pm

    Michael,

    Thank you for the explanation. Now I can see the problem. So if the loan is interest only, and as you guys suggested, never pay extra into the loan. the extra money will alway goes to the offset account, is it still accaptable to claim 1/4 of the interest paid for the whole loan tax deductible in ATO's view?

    Another one problem I can see now is the offset is not just for not-deductible one, but also for deductible one, which is really not a good idea. Is my understanding correct?

    Regards,
    SydneyRental

    Profile photo of auhealthauhealth
    Participant
    @auhealth
    Join Date: 2011
    Post Count: 6
    August 31, 2011 - 2:39 pm

    That is the part I am confused. What I meant is after top up, the bank increases the loan amount from $300,000 to $400,000 for Loan A (PPOR). The increased $100,000 aomunt in Loan A is available for me to redraw and used as deposit for IP. Is this a problem from ATO's point of view?

    Profile photo of auhealthauhealth
    Participant
    @auhealth
    Join Date: 2011
    Post Count: 6
    August 31, 2011 - 2:18 pm

    Thanks you for answering my question.

    For the TOP UP option, I still don't understand what you meat by contaminated the loan. In Loan A, $100,000 is used for investment (for purchasing IP), so the interest paid for that portion should be tax deductible. Is that correct?

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