Forum Replies Created
Banks such as ANZ will give you addbacks, although assessing your rental at 75%, they understand negative gearing returns cash to your pocket.
At least we have done our bit, we given food for thought for many investors…..
Signing off for today….
I would set up another offset to avoid this confusion, This would ensure the money has never been paid down from the initial draw down.
One could also argue the purpose of the loan from particular dates with a paper trail. Could the purpose of the loan not start from a certain date?
That is a very good point….
Wilma Domjan of the ACT had a claim of additional interest denied b/c she had money redrawn from the loan account into her personal cheque account to pay a bill for her rental property.The ATO successfully argued that mixing the borrowed money with her personal savings she could not clearly show the money that was redrawn from the loan had been used for.
Although not related to what we are talking about, borrowing to invest in a savings account is allowable tax deduction if it provides an income.
Nil risk, i.e. Investment loan A = $200k , new advance = $50k (put into offset account). If this money is used at a later date for an investment, there will be a paper trail from the offset account showing the $50k was used as a deposit for investment property B,
If you wish to use $20k and leave $30k, then set up two offsets (maybe one for personal and one for investment/ business). In this event there is no need to convert the loan at a later date. An LOC does not allow this.Essentially we are saying the same thing in relation to Domjan.
It is an offset account, not the loan account……. that's why, "No" to LOC.
Domjan redraw was from her loan account to her personal cheque account…..
The following gives you an idea of the complexities of financial advice: Please consider
1. Plans in relation to health, income insurance, Trauma, Life/TPD (term or whole of life)?2. Asset protection-general insurance (house, contents, Liability, Indemnity etc)?3. Tax Deductible Debt v Non Tax Deductible Debt4. Fee’s and charges charged by banks and other related industries?5. Your own home and tax benefits- Owner occupied exemption, CGT exemptions 6. State and Federal Grants for homeowners.7. Mortgage Broking concerns- interest rates, variable, low doc, LOC, fixed (short v long-15 years), 100% offset, investor loans- tax deductible set up, Records to keep for tax deductions, Consumer credit code, LMI, Capacity8. Purchasing costs of a home- government search, conveyancing, P&B9. What is capitalising interest? Sub accounts?10. Are you in the property business? 11. Business structures, Sole trader, Partnership, Company and Trust ( Bare, Discretionary, Unit, and Hybrid).12. How does A= L+OE apply to a property business?13. Why would you buy a house in a trust? This is often not good contrary to the latest hype.14. Investment property seminar –interstate, are they deductible? 15. The benefits of Holiday homes.16. In who’s name for taxation and capital gains purposes?17. Is interest payment tax deductible prior to a house being rented out? What about repairs after the property has been tenanted for income purposes?18. Land tax- name on title, joint tenants, tenants in common, % effect v taxable income v Capital gains tax19. Joint ventures?20. Expected rate of return v inflation (opportunity cost)21. Commercial v Residential v Public Trusts v Syndicates v Trust22. Do you want to retain your present home/ what are your house plans or areyou planning to move within several years?23. Rent v Buy, Shares v Property24. Employment situation and taxable income?25. Non -Tax deductible debt: credit cards, hire purchase and leases of domestic nature. What effect do these have on your mortgage or loans available?26. Depreciating assets v appreciating assets – What are these?27. Free cash flow- How can I improve this situation? How do you structure yourself to afford more property.28. Income Tax Brackets and Capital gains Tax.29. Age profile and the ability or risk that may be taken?30. Should I pay off my home?31. Mortgage repayment calculator? What can I afford to repay?32. How can paying off my home be accelerated?33. Negative v positive geared, The upside and downside to both of these?34. What is OPM, leveraging, equity, and collateral?35. Where to buy, unit/house, rental yield, new/old, price range, pool etc36. Management issues with properties. How to avoid these? 37. Can someone house share with me to help pay the mortgage?38. Strategies and tricks?39. Co-owners with friends is this a bad idea?40. Depreciation v Repairs v Capital Improvement41. Loan cost write off42. What is the Cost base for CGT and the trigger date?43. How a line of credit can be so wrong?44. Pre-paid interest and variation to PAYG ( form 1515).45. How Lenders Mortgage Insurance (LMI) is of no financial concern.
A question such as the above will get a response that may cover only one of the above topics – If you went away to make a decision based on one, two, or even three of the facts above then you are short changing yourself and the ability to make a valid decision for your future.The opportunity cost is also something you should consider? Buying shares as you have suggested….. Better still, is trading long term covered call options…..
Back into the offset of the I/O loan from investment property that the equity is taken, sometimes setting up several offsets as is applicable to where and how the money is being used.
Money does not need to be used at settlement, I like to keep the money available for a rainy day……. If the property market trends backwards, then you buying power is increased provided you meet serviceability (as one example of why I would do this).
I would still recommend an offset account attached to the investment loan:
Two reasons:
1. When taking a loan increase due to an increase in equity the money can be separated from the existing. The equity can then be used and separated for investment / business purposes and for personal use.
2. If the PPOR is paid down, you now have a place to deposit cash without paying down your investment loans (you can then remove this money at a later date maintaining the investment balance and tax deductible status).I cannot stress that LOC's can be mirrored (provide the same benefits) by using a standard loan with offsets with the added advantage of flexibility (as mentioned above in point 1 and 2) and lower interest rates (should not be the only factor, but is a bonus).
Andrew,
You are not stupid, but were misguided, that often happens in life, where there is a will there is a way, try this to get you out of trouble……
Try this: OSR Ruling 30 Section 55 part 1 (
(11) -Read below, All you require is a paper trail as required at the end of this section,(b) a transfer of dutiable property from an apparent purchaser to the real
purchaser if:
(i) the dutiable property is property, or part of property, vested in the apparent
purchaser upon trust for the real purchaser, and
(ii) the real purchaser provided the money for the purchase of the dutiable
property and for any improvements made to the dutiable property after the
purchase.
The three points I mentioned where very relevant, in the one you have mentioned, if the person has extra cash- Where do you want them to park this?????? I would like to offset this with existing investment loans.
Anyway, I am not trying to educate you, but suggesting there are many ways to skin a cat.
Ask yourself the question. Did you invest to be in the property market for three years and expect to retire / be wealthy / or like. Your answer was probably NO! Did you know your own circumstances at the time and the financial situation you would be facing at the time! Your answer is Probably YES! Have they changed today??????? That is the dilemma, what is different today from three years ago? Forget about the $50k in property decline, as investing is a long term deal…… Why is the deal so bad today (apart from the return)? Why do you want to realise the loss…..
We need a lot more info to guide you through this one.
I really like how we all think the same on this site???? and generally write the same answers?????
Take the advice from the two guys above for example, they are correct on one front, the front they are writing about, but so wrong in many other ways….
That is the danger of taking advice when people don't know all your personal circumstances.
That is a rather large negative from me, think of it in terms of accounting, tax deductibility and separation of investment from personal monies.
What is the size of the GRANNY? If <60m2 refer to the ‘Affordable Housing Policy’ that the N.S.W Govt. brought into effect in 2008, the regulations require – 450m2 block or greater – Block width of 12m or greater – Property that complies with the 149 certificateJust a thought………..As the regulations are not so rigid.
Without knowing your personal circumstances it is very difficult to assess you in a manner that would be justified. Many people write on this site thinking they will get the solution to the property investing in a paragraph. Financial advice for the most basic of my clients takes an initial three hour consultation.
The following gives you an idea of the complexities of financial advice (this is on the most basic level). 1. Plans in relation to health, income insurance, Trauma, Life/TPD (term or whole of life)?2. Asset protection-general insurance (house, contents, Liability, Indemnity etc)?3. Tax Deductible Debt v Non Tax Deductible Debt4. Fee’s and charges charged by banks and other related industries?5. Your own home and tax benefits- Owner occupied exemption, CGT exemptions 6. State and Federal Grants for homeowners.7. Mortgage Broking concerns- interest rates, variable, low doc, LOC, fixed (short v long-15 years), 100% offset, investor loans- tax deductible set up, Records to keep for tax deductions, Consumer credit code, LMI, Capacity8. Purchasing costs of a home- government search, conveyancing, P&B9. What is capitalising interest? Sub accounts?10. Are you in the property business? 11. Business structures, Sole trader, Partnership, Company and Trust ( Bare, Discretionary, Unit, and Hybrid).12. How does A= L+OE apply to a property business?13. Why would you buy a house in a trust? This is often not good contrary to the latest hype.14. Investment property seminar –interstate, are they deductible? 15. The benefits of Holiday homes.16. In who’s name for taxation and capital gains purposes?17. Is interest payment tax deductible prior to a house being rented out? What about repairs after the property has been tenanted for income purposes?18. Land tax- name on title, joint tenants, tenants in common, % effect v taxable income v Capital gains tax19. Joint ventures?20. Expected rate of return v inflation (opportunity cost)21. Commercial v Residential v Public Trusts v Syndicates v Trust22. Do you want to retain your present home/ what are your house plans or areyou planning to move within several years?23. Rent v Buy, Shares v Property24. Employment situation and taxable income?25. Non -Tax deductible debt: credit cards, hire purchase and leases of domestic nature. What effect do these have on your mortgage or loans available?26. Depreciating assets v appreciating assets – What are these?27. Free cash flow- How can I improve this situation? How do you structure yourself to afford more property.28. Income Tax Brackets and Capital gains Tax.29. Age profile and the ability or risk that may be taken?30. Should I pay off my home?31. Mortgage repayment calculator? What can I afford to repay?32. How can paying off my home be accelerated?33. Negative v positive geared, The upside and downside to both of these?34. What is OPM, leveraging, equity, and collateral?35. Where to buy, unit/house, rental yield, new/old, price range, pool etc36. Management issues with properties. How to avoid these? 37. Can someone house share with me to help pay the mortgage?38. Strategies and tricks?39. Co-owners with friends is this a bad idea?40. Depreciation v Repairs v Capital Improvement41. Loan cost write off42. What is the Cost base for CGT and the trigger date?43. How a line of credit can be so wrong?44. Pre-paid interest and variation to PAYG ( form 1515).45. How Lenders Mortgage Insurance (LMI) is of no financial concern.
Your question such as the above will get a response that may cover only one of the above topics – If you went away to make a decision based on one, two, or even three of the facts above then you are short changing yourself and the ability to make a valid decision for your future.The portfolio product can be a very good tool for wealth creation when used correctly, ANZ also have a product that is competitive- the benefit of the ANZ product is the offset account. STG doesn't allow for an offset, this can become restrictive over the long term. Consider when your PPOR is paid down.
It is the first six months of occupation the OSR is concerned. No leasing for this period.
This is a wonderful product if used well, it takes a little explaining. This is very good for wealth creation…….
ANZ also have an attractive product – on face value they are the same, but ultimately they have notable differences.
Drop me a line, or visit if you are in sydney… Nil charge of course…..
Just a quick one,
Re-distribtion of credit limits over a portfolio product that allows capitalisation of interest to improve tax deductions and ultimately pay down Owner Occupied (non-tax deductible debt). This is the obvious and simple benefit.
The rest of my life story will take 4 hours to discuss never mind write…..
Dan42,
I assure you Banker is not arguing that your personal circumstances require crossing- In fact you would not even consider the idea from the information you have provided. What you have mentioned is correct. We all have our stories. The point he is making is don't bash an idea / concept unless you have considered every angle.
C/C is not evil at every level, and it does provide an avenue for wealth creation for many people.
(11) -Read below, All you require is a paper trail as required at the end of this section,
