I agree Freckle, except perhaps for the fact that the offset account should be applied to private debt if it exists. There won't be any tax effect in this case. I doubt that you'd keep the private debt for thirty years if you could help it, but that's not really the issue. 
  My pet hate is when banks and advisers love to tell us how much interest…[Read more]

Hi Harry, I assume your accountant meant that it pushes you down to the next bracket below if you claim depreciation. That may be the case if it pushes you down to the zero tax bracket ($18,200 pa), but even if it pushes you down to the bracket above that (20.5%) then it's still worth claiming depreciation. It all helps with your bottom line,…[Read more]

Wow Sandy, That's a pretty sizable IP. I said you would save a lot more in tax than it would cost you for the changeover but I didn't really think that through. The value of your IP made me think that perhaps you should really calculate the numbers. You haven't given us the size of your IP loan and your PPoR loan, but let me work through a…[Read more]

Hi Sandy, this is a very common problem. You can't increase the mortgage on your IP to increase the tax deduction. It's all about the purpose of your loan. You're effectively taking out the extra loan to finance your ppor and this doesn't wash with the ATO. Probably your best solution is to sell your IP. It won't have a huge CGT as it was your…[Read more]

Déjà vu Kenny! Thanks again for your help on this topic with me. I've since refinanced my mixed purpose debt. Cheers, S/CRichard you really should know better, we've had a few discussions about mixed debt before.

Hi Dru, interest in your term deposit is taxable income, so to compare with the same tax bracket of 39.5%, you'd need to be getting better than 5.5% which will give you 3.3275% after tax. If you started your term deposit a while ago, you may well be getting better than that. You'd pay a penalty if you withdraw it early. The difference of a p…[Read more]

Hartfam, it's a tax credit of 6k, ie 6k less tax. The actual deduction is nearly twice that, as you're in the 46.5% bracket. This deduction will rise if interest rates rise, but it will fall as depreciation dwindles. Property is certainly a great benefit in the long term. Tax is just part of the picture, and as I've mentioned, getting big tax de…[Read more]

Hi Hartfam, just one thing about shares/manged funds, you'd be hard pressed to invest in shares that pay less than the current interest rate anyway. Banks etc currently have a yield of about 5-6% fully franked, which is 7.14 – 8.57% after franking credits are added in. Your loan interest may well be less than that if you use a home equity loan, so…[Read more]

No WJ, it's not really "tax free". Your just offsetting tax deductible debt. It's only when you're offsetting private debt that you can truly call it "tax free". For example, if Dru is in the 39.5% tax bracket, his effective saving with the offset account balance is 5.5% X 0.605 = 3.3275%. If the offset account is against private debt, then he…[Read more]

Hi Shivasko, thanks for the good rap. As the sticky thread says, always seek your own professional advice if you're unsure, and take what we say as a guide only. What I can say however, is that my ppor is joint tenants with my wife, and I have a few IPs in my name. I have loans in my name only, using our ppor as security, for which my wife had to…[Read more]

Hi Shivasko, You certainly can use all the available equity as Richard says. You could increase your existing loan, but it may be better to simply start another loan account with the same bank. It can be in both your names to simplify the application, and then you can invest it in an asset solely in your name and then claim all the interest as a…[Read more]

AW 180k is their combined income. You're a bit out of date by the way, the current tax table is 39.5% from 80k to 180k.Cheers.

Hi ClarieBear, Welcome to the forum. You certainly have a fair bit of equity built up with your two props, certainly enough to fund the 25% required for another IP or two (or more). LOCs don't really have features, they just have an interest rate as low as you can get it! Debt servicing ratio may be your limiting factor.You could switch your IP…[Read more]

Hi Mrs P, here's some real numbers based on a house that cost ~200k to build including fittings, landscaping etc, just to give you some idea.The QS set the cost to build the house at 187200 which will be depreciated at 2.5% prime cost (ie it stays the same each year until it's used up). This will give me a deduction of 4680 pa for 40 years.The f…[Read more]

Thanks Terry, I've since done a bit of reading about the Steele case. Sorry I should have done a bit more research, but that keyword "Steele" was the important bit of info I needed.   Just one thing: How do you claim for the interest when doing your tax online. It won't let you lodge unless you put a figure in the "date first rented" field. I l…[Read more]

PS B, here's a good book by Stuart Wemyss that I've just read. It gives a good comparison of the various strategies of pos or neg gearing and development, plus defining goals, retirement strategy etc. http://www.prosolution.com.au/books/ppuzzle.htm The only thing I'm a bit dubious about in his book is the expectation of always getting 7 to 10% c…[Read more]

B, it's great that you've now created a determined goal; I think that's the first big step. I finally saw the light 11 years ago. I started with 4 negatively geared IPs that are now just about neutral after tax. My rent has gone from about 155pw to 280pw on two houses, and from 200/w to 300/w on two units. Most of the depreciation has gone now,…[Read more]

Hi Bergy, ppor = principal place of residence as you've guessed. You have good equity in that. An additional cash flow +ve property won't really affect your negatively geared property.    Your negatively geared property may drop you down to a lower tax bracket, so when you're working out your net cash flow from your next property you have to use…[Read more]

Hi Prestons, there's no need for personal emails; just reply on the forum is fine.I don't know about wraps (and I'm just not interested) but for buy & hold, IO is best if you have any non-deductible debt. There's such little difference between IO & P&I for a short time frame then it doesn't really matter if you're doing flips I would think. Eg for…[Read more]

Looks like your question has been ignored P. (like my answer;) I suggest you go for a good trawl through the forums. You'll find a lot of threads discussing IO vs P&I.BTW it's principal, not principle. It's a very common misspelling in these forums though. Have a look in dictionary.com.