I wouldn't do it like that myself.
You would be borrowing to pay the interest on line 1. Although you would be putting the rent into loan 2 there would still be a shortfall – probably.

Have a read of TD 2012/1
http://law.ato.gov.au/atolaw/view.htm?docid=%22TXD%2FTD20121%2FNAT%2FATO%2F00001%22

Get tax advice before you act on your structure.

Taking money out of redraw = new borrowings. So the interest on this will only be deductible if the redrawn money was used for investment purposes.

Hi Nick

this must have been what you were requiring the PI insurance for?? I paid around $800 from memory.

Where are you located?

When you have money in the offset and are buying your second property you need to reassess at that time.

Ideally you would want to keep your money in the offset and borrow the lot to buy the second IP. But you may not have enough equity at that stage. So you could either
1. use the cash in the offset or
2. pay down the existing loan and reborrow it.

2 may be preferrable if you were going to move back into the first property at some stage.

Qualifying for finance may be an issue – you may be classed as an owner builder.

Move in. move out.

under s118-145 ITAA 1997 a person can be absent from their main residence yet still count it as their main residence for it to be CGT exempt for up to 6 years. To get the full exemption you need to live in the house initially and establish it as your main residence. You can then rent it out and claim all associated costs – yet still retain the CGT exemption.

Hi Dru

Why not
1. Buy a place to live in and then rent it out. You can retain its CGT free status for up to 6 years. CGT could be considerable if you are sucessfull in adding value so it may be worth the hassle of moving in and out.

3. Def do the IO with offset. But, you say you want to pay down the principle of the second one – this is not adviseable as if you were later to buy a property to live in again then your cash would be tied up.

4. Yes, good idea. The only problem with super is that the equity in the properties cannot be used. ie you cannot borrow against the first one for the second. But it is still a good strategy as the properties can be CGT and income tax free once you hit pension phase or meet a condition of release. Super is also a great asset protection vehicle and generally falls outside your estate and there are tax benefits to your depenants if you were to die too.

What will your income be like when you are not working?

If might be better to open a savings account in your own name and earn some tax free interest and let your husband save more tax on the negative gearing – but this will depend on the savings rate.

I seen one on TV tonite which was around 6.01% at call for the first 4 months with Rabo bank.

me too

Lots of spam on this site.

My impression is that Cintaku wants to buy a holiday house but still claim all associated costs with it.