Forum Replies Created
Offset account is simply a bank account linked to your loan. What funds you have in it “reduces” your loan balance and you save interest. But the funds are never in the loan so they can be drawn out for any purpose with contaminating your loan in the eyes of the ATO – it is the best structure for most people I believe.
ie if you have a $300K loan and have $100K in savings. You will pay interest on $200K only. Should you draw that $100K to buy a Lexus then your original $300K loan remains 100% deductible. If you had kept the money in the home loan and redrawn it then you will now have a loan with $200K deductible and $100K (for personal use) not deductible.
I know my example is extreme but substitute new HOME for the Lexus and you will see that it is a common trap many fall into.
I also agree that IO is the best option at this stage where you are investing for growth. Inflation will reduce the loan balance faster than you can pay it off so best to use saved money in the offset for other investments. I use managed funds and shares and leave equity to buy more IPs – but that is not advice for you!!
Hope this helps,
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Take your time. Talk about it often and try to get your partner to meet some other investors.
If you try to push her she will push back. If you lead her she will slowly follow.
My wife was the same when we bought our first place – that $50K loan was terrifying her. Now a $M loan wouldn’t phase her!
Encourage her to read – Jan Somers is a good starting point. Steve McKnights first book is good too.
Take your time. Drag her to some open houses and engage her in the process – ask her what she thinks is good and bad about different places.
Above all respect her opinion – it is correct for her at this time in her life. She will come around.
All the best,
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Originally posted by World Changer:Hello jo l,
I wouldnt be concerned at all.This is an un foreseen circumstance and you are not moving out in some cunning plan to rip off the government. I dont see that you are doing anything wrong,just give them a call and explain all yr options.If you dont rent it out in this time it will not be a problem,you are still paying all the utilities etc.
Dont be worried about this situation you have enough to deal with in yr family at this time!
It will all work out for u.
all the best
Luke“Don’t let yr character be impacted by yr surroundings”
– Rachel Scott(17 yr old killed in columbine shooting 1999)http://rachelschallenge.com/good advice Luke …
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Why don’t you leave all your furniture in the property with the utilities in your name for the next two months – is continue to maintain it as your home.
Just because you are staying with family temporarily shouldn’t affect your “homeowner status”.
I wouldn’t worry about it too much. It is the places that are tenanted that attract their attention.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Yes you can do it.
But it is pointless as the new borrowing will not be deductible and it will only mess things up.
There is no simple way to change the loans from non deductible to deductible.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Originally posted by jayco:Alll other expenses including interest will be tax deductible while it’s an IP. Depending on the age of the property and specially if you renovate you will be able to claim depreciation as well.Hope this helps[smiling]
ElkaHi guys,
Just want to confirm that once the property is converted to an IP and you are claiming interest and other expenses as a tax deduction, whether that precludes you from applying the six year rule when on-selling the property.
In my situation, I purchased a property as my PPoR, read Steve Mcknight’s 1st book, converted it into a cashflow positive IP property, refinanced it (interest only) in order to purchase another IP, read Steve’s latest book, reassessed my portfolio, and now I want to realise the capital gain in the 1st property to pay down some debt in other properties. I am wondering if I can apply the six year rule to the first property. I have not nonminated another PPoR since moving out of it but I have been claiming all expenses on the property as a tax deduction. I have researched the forums and the ATO website, and although I seem to meet the criteria of the six year rule, no-one seems to talk about what the situation is if you refinance and claim expenses.
Anyone have any thoughts?
Thanks!
Refinancing has no relation on the 6 year rule – nor does claiming expenses.
The only thing that will prevent it is if you own another home.
They can overlap by 6 months if you are selling one but you cannot claim two PPORS otherwise.
So if you own a home and then rent it for 6 years and move back in then no CGT is payable – regardless of refinancing, tax deductions etc
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Originally posted by The investor:Simon,
Do you know if this is the case in NSW aswel?
Thanks
Is true for all states.
When it first came out then an IP meant you lost it forever but it was amended a long time ago but a lot of well meaning friends and family perpetuate the original rule [confused2]
My website has a link to each state’s FHOG website so you can read it up for yourself.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Common misconception that you forego the FHOG if you buy an IP.
As long as you don’t occupy the IP then the FHOG is there for when you do buy your home.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Originally posted by L.A Aussie:Absolutely. I know of 2 guys who both bought identical apartments in the same building, then moved into each other’s apartments and rented from each other and were able to claim all the expenses etc. Good one!
By the way; there is absolutely no where in Aus that is like L.A (thank god).
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
and then lost their CGT exemptions. Be smarter if they established each place as a PPOR first.
If the ATO looked into it I wonder how they could show that they didn’t do this just for tax avoidance reasons?
I am not sure about any annual elections – my accountant does my tax for me. It is my understanding that it is just done after the sale of the property when calculating any CGT owing.
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Sometimes an IP is easier as you can factor the rent into the deal.
Building an asset should help him buy his own home in the medium term but there is no hard and fast answer I can give.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Our mortgage system is just not structured to do that. Is a case of a new loan after purchase as per any other property. Unless you had an existing LOC that could cover it then it is a cash deal.
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Originally posted by ctaing:Kjs, we’re here to learn and are warned enough times in the forum to back up opinions with qualified professionals with expertise in properties.
I cannot underestimate MB opinions. Loan features are constantly changing as well as the rigid tax compliance issue to boot. Where do you turn Kjs? Reading this thread alone said a lot…
Afterall MBs are the expert in their field.
I think his point is valid and important. This industry is full of ratbags and well intentioned amateurs who both give suspect advice.
I believe the regular Brokers (cept me of course [biggrin] ) on this forum give good advice in the most part and will decline to give too much detail where they don’t have the full situation. Accept what they say as a generalised truth but consult them individually for specifics in your case. If a broker like Terry or Richard cannot help then they will suggest an accountant or solicitor who can.
I do try to keep down the number of fly in brokers who simply are trawling for business and actively delete any post they simply asks you to call them for all the answers …
CT
[blush2]
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Originally posted by catherina38:Yes, I am clear that i’ll have 12 month to move in to the new home. But, the tenants that were already there will then be paying rent to me. Many say I can’t do that. The thing is I don’t care about the rental money because I want to live there.
Please anyone opinion or experience in this to let me know how to go about it.Ta.
catherina.Don’t listen to those people – they don’t know the rules. Ask them to show you the legislation to back up their claims – there is none.
Of course you can receive rent. You also have to declare it in your tax but that allows you to claim all costs such as interest, repairs etc for that period. This wont affect your FHOG.
Ask your solicitor to confirm all of this when you talk to him about how he acts for you.
There will be a CGT issue but as it is just months then it should be negligible if you hold the property as a home for the long term.
All the best,
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
The answer is simple. You have 12 months to move into the home and still keep the FHOG. This is longer than most normal existing leases.
You will need to occupy it for 6 months from when you do move in.
Hope this helps.
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
I normally delete these to save people from getting ripped off. But I thought I would leave this one up as an example of the sort of spam that is going around.
Nigeria is the first red flag on this one!
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
IO with offset is what I would do in my situation. Especially if the plan is to rent it out.
If any broker suggests P&I in this situation you shoulkd move onto a new one.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Originally posted by cyclist:Simon,
Thanks for the points you raised I am glad I posted this question on this forum now.
I had no idea that the advisor would get $4000 upfront. I ll certainly be pushing for a discount broker if I decide to go that way (I’ll certainly weigh it up very carefully now and do some research)
Also I did not know interest can be claimed if I intend to develop the land in the near future.
And lastly teh thought of offset never even entered my mind or the planners> It certainly sounds like an option to me.
I paid the man $900 for a plan. I did not know what I was going to get but after receiving the plan I am a bit dissappointed with it cause it did not tell me anything new.
Thanks for advice on this forum, it will help me make much better informed and balanced decisions.
In all fairness if he charged you upfront then he probably would rebate some or all of that $4000 back to you. It would be a greedy finacial advisor that did both. You are well in your rights to ask him about it.
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
well I cannot give you any financial advice.
Some points:
What are your longer term plans for the current home? If you think you will ever upgrade AND keep the current home as an IP then I would advise against banging your lump sum into the loan. I prefer an offset as it will be the same in the short term and more tax effective if you do rent this home out.
Land vs shares.
Noone knows what the future holds. Your planner will make money from you buying a manged fund. About $4000 upfront and an ongoing trail. Using a discount broker will save you this first $4000.
If we can assume that the land and the fund will both appreciate the same then this is a no brainer. The income from the fund and the deductibility of the interest makes it a better deal. But that is not a reliable assumption to make and you will have to research how well your land will do vs a historical return of about 15% on the fund – and over the long term this is realistic even if there is a correction soon as you suspect.
Few people know that you CAN claim the interest against a block of land if you have the INTENTION to develop and rent it out in the near future. Perhaps your advisor doesn’t know this? Or is keen on the $4000 commission on the fund…
I buy mine through http://www.nevward.com.au and pay $0 upfront.
Disclaimer – I hold funds and no land …..
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Originally posted by jorgon:I’ll pay the site a visit.
You should go one step further and speak to Michael about what his staff can achieve for you.
I wouldn’t hesitate for a second in recommending his team to anyone. Michael is one of the good guys in an industry that attracts fools and shonks.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Sounds about right.
We can probably cope with more difficult than that [biggrin]
Cheers,
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
