Forum Replies Created
- Originally posted by Terryw:Originally posted by donaldx:There can be serious tax implications with using a LOC. Offset is much simpler
Hi Terry,
Can you elaborate on the potential tax implications of using a LOC? I’m using a LOC for my development project, so I’m very interested to any potential problems with this approach.
Thanks,
Donald XieHi Donald
eg. If someone were to use a LOC on an investment, and then have their wage deposited in to the LOC account, the ATO would class this as a repayment. If they took money out to buy food, then the interest on this would not be claimable as it would be new borrowings for domestic purposes. Over time this could lead to their deductible portion of the LOC rapdily reduce, while the non-deductible portion increases.
However, if a offset account was used, interest saved would be the same, but since its a separate account to the loan, there would be no new borrowings when money is withdrawn, and therefore, no problems in claiming interest. Certainly less messy at tax time.
Terryw
Discover Home Loans
Parramatta
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Just send me a blank email, with “subscribe†in subject line.Exactly correst. Plus your accountant will hate you as they will have to track every redraw so as to determine what exactly is deductible. You will create a real mess.
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
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I would be considering a professional package with a major lender. This will also save you other banking fees etc.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[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.
Interest on a new loan – yes.
interest on interest = capitalising interest = no.
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
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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 see my children as being stakeholders in the family enterprises and as such I try to treat them as equal as they have the capacity to understand and/or carry.
I am not such a private person that I worry about their friends and friends families knowing my business. Is all good as far as I am concerned.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[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.
Redwing is correct.
Deductibility of interest is determined by the purpose of the loan not what it is borrowed against.
So to draw money to buy a new PPOR will not be deductible even if drawn against a rental property.
There are different strategies to get around this. Some quick and expensive, others slow and cheap.
Best to do some searching here and speak to your accountant. I am happy to give some tips over the phone if you need them.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
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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 learn&share:
A good accountant should also be able to advise you how to structure and utilise the LOC or offseting.I would like to hear how this can be done as well. A LOC is little different than an IO loan. What is paid in is lost and what is drawn is deductible only depending on the purpose it was drawn for. If an accountant can make that different then he is either smarter than I realise or advising a little close to the wind for my liking.
I recommend the offset account over the LOC for all the reasons given. Plus the fact that an LOC is in realist a giant credit card and dangerous in the wrong hands.
Have a lovely christmas.
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[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.
They seem just like all the others.
I am sure you can do better than them.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[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 not being on a salary mine is always hard to define. I would tell them the truth.
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[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.
All the oruginal forums are still there with all the same faces.
All that has changed is a few new closed forums for the paid subscribers.
Any division is in your perception [biggrin]
Don’t build walls where they don’t need to be!
Have a great weekend,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[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 mogul1975:Derek,
I’m not sure I understand your rationale.
1. I intend to sell my IP’s to repay my mortage on PPOR.
2. My PPOR is now owned free and clear of mortages.
3. I now wish to buy some IP’s.
4. It would be nice to be able to buy back the IP’s I sold in Step 1, thus making all of my new debt investment debt. I was hoping someone here had a creative (but legal way) of doing this.
5. I may be better off skipping out step 4 and just starting all over with an improved structure, because I am suffering big time with my PPOR mortgage. I have taken the other tips on board for use in the mean time. I have plenty of number to crunch yet before I go and sell out, with CGT, SD and Agent fees to weigh up.6. Keep the good advice coming. Don’t be afraid to wear your heart on your sleeve. I’m sure that we are all mature enough as investors to do our own validation of information before we go ahead and use it.
I hope this better explains what I’m trying to achieve, I thought it was a long shot. I do intend to see an accountant in due course, but its always useful to get some tips from the real experts(people who actually invest) first.
Cheers
You can sell your IP’s to your partner or into a trust but you will have to pay stamp duty again. It does mean you can top the loans up to 100% plus costs and it will all be deductible.
There is a cheaper yet slower way as Schwing described.
Divert all IP income into your home loan and topup the home loan for every expense (less interest). This will gradually transfer the non deductible loan into the deductible one. Like I said it is slow.
Where are you located and I might be able to suggest a savvy accountant to speak to.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
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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 asdf:Hi Shwing,
That sounds like a fantastic idea. Never thought of that. I’m pretty sure interest on interest is tax-deductible
Interest on interest isn’t deductible and that isn’t what Schwing was suggesting.
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
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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.
Some pretty powerful examples Harry. You must have some good contacts to hear about those deals. I know they don’t come by me very often.
I don’t disagree with all you say. But when you are buying cheap for short term growth that is a different game and one with different risks.
Please don’t think I am knocking you. I am impressed by what you are doing.
Kind regards,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
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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.
Derek is spot on.
You cannot simply transfer debt like that to change the deductibility. There are however, ways to swap non deductible debt to deductible.
Some are fast and cost a substantial amount in stamp duty others are free but slower.
It should be the goal of all investors to have 100% of debt tax deductible.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[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 like the company was started over a long boozy lunch [biggrin]
Sorry never heard of them mate.
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
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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 hb:Mortgage (I have been through three booms) Hunter.
did thou not heed the sentiment about property through the bust cycles?
was property not on the nose?
where the papers not ripe with mortgagee auctions?ahhh how quickly one forgets…..
i remember well a property investor hocking himself for over 1 mil only to find no buyers over 360k….
and he couldn’t do the “buy and hold” theory, after all 0% equity doesn’t go down well with the banks, when times are tuffbanks
those cruel heartless banks……
after all its only money
and according to the theory property will always go up….
and it did
15 years later its value is $ 1.3 mil
see i told ya
property always goes up
a cool 200k…. how good is that for the original investor
still
much better for the second investornow we might not get “the recession we had to have”, but do you think the government wants house prices to keep doubling while it screws the workers?
and do you think real wages going up only 14% and house prices doubling, over the last 8 years, is substainable?i doubt it
so like any good gambler i’ll take a punt
sell 50%, cashed up
hold 50%
let the good times rollhow about you Mortgage Hunter
you’ve also seen the busts
isn’t that the time to buy?harry
Yes it is the time to buy.
I was actually talking about my mistake being selling and not buying. If I had not sold I would be better of now was the gist of my post.
Those who sell at the peak and buy in the trough are cleverer than I. Picking the right times is very very easy looking back.
Looking forward is a whole different kettle of fish. I will leave that to those who are smarter than me or less risk averse.
There is a huge difference between investing and speculating. As you have indicated you are a gambler I guess speculating is your forte. I have made the conscious decision to be an investor.
All the best,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[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 already have changed my power provider.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[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.
Is this a trick question? Sounds like something the doorknockers ask [blush2]
I am sure most people would say yes.
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[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.
Where in Newcastle are you? I am in New Lambton.
If you ever find yourself nearby give me a call and pop in for a coffee!
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[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 personally agree with your mate and doubt it will add any value compared to painting.
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[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 used Paul Siderovski once. He quoted me $400. Billed me $1600 with no communication prior, he seemed surprised that I was surprised. When I pointed out he had missed something small he charged me $90 to fix it. This took him 2 minutes to amend as I later discovered.
I am sure he is a smart guy and a capable accountant. I just didn’t like the way he treated my business.
All the best,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[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.
