LOC question

Viewing 7 posts - 1 through 7 (of 7 total)

Devo
Member
@devo
Join Date: 2003
Post Count: 28
May 14, 2004 - 3:46 am
Hi there follow forumites
I have a question re: LOC.
Background
My other half and I have set up a LOC based on our equity growth. I am aware that for accounting purposes, it is much neater job and cause less headaches if you don’t put other purchases on your line of credit which are not necessarily investment orientated as it can make things very messy when trying to reconcile and balance the books.
We have an outstanding debt that we would like to put on the LOC and have it paid off before 30 June. In the meantime, we have not bought any IPs with the LOC and plan not to until the new financial year i.e. after 30 June.
Question – Does anybody know that if we were to do this, would it create problems with our LOC later in the way of accounting etc? If we pay off the debt before 30 June, will it be like we never bought anything with it as far as accounting for new financial year investment purchases are concerned?
Any guidance would be greatly appreciated.[cap]
Cheers
Devo
Terryw
Participant
@terryw
Join Date: 2001
Post Count: 16,213
May 14, 2004 - 4:03 am
Devo
Once you pay the balance down to zero again, then I would think there shouldn’t be any problems.
Terryw
Discover Home Loans
North Sydney
[email protected]
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email Me
Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Monopoly
Member
@monopoly
Join Date: 2004
Post Count: 1,612
May 14, 2004 - 6:11 am
Hi Devo,
My husband and I have a LOC, which we have over the years used to purchase IPs and other items. As Mortgage Advisor said, it is not that difficult to calculate the interest part of the loan used for the non-deductible items. The example he gave is pretty straight-forward; even I can follow it!!!
Nonetheless, many people prefer having a LOC over conventional home loans, as it affords them greater flexibility. It is not for everyone, and requires a great deal of discipline because it is like having one hell of a huge credit card (but at a much friendlier rate). But you would know that already……
Happy spending,
Jo
salacious
Member
@salacious
Join Date: 2003
Post Count: 373
May 14, 2004 - 9:02 am
I simply have two LOC accounts 1 personal 1 buisness,accountant likes that.
Dom[biggrin]
Derek
Member
@derek
Join Date: 2004
Post Count: 3,544
May 14, 2004 - 9:42 am
Hi Devo,
I wasn’t sure whether or not your LOC already has some investment debt in it so this response may be unnecessary – but just in case.
If you have some investment related debt on your LOC and then add some non-deductible debt to your LOC you create a mixed purpose LOC.
Any repayments made are, as far as the ATO is concerned, apportioned over the total debt and are not directed towards your non-deductible debt.
As DAAJ said this can be overcome by creating ‘split accounts’ as this provides you with facility to pay off one part of your total debt, thereby meeting the ATOs needs and regulations.
Derek
[email protected]
Property Investment Support Available. Ongoing and never stopping. PM welcome.
Devo
Member
@devo
Join Date: 2003
Post Count: 28
May 15, 2004 - 1:06 am
No I don’t mind you asking Mortgage Advisor. We have the ANZ Break Free package. Our interest rate is 7.07%.
Thanks for the info. Thanks to everyone. Very
helpful.
Cheers
Devo[thumbsupanim]
Devo
Member
@devo
Join Date: 2003
Post Count: 28
May 17, 2004 - 4:40 am
Once again, thanks for the info Rob. I will check with the other half re: our interest rate etc (she’s pulls the purse strings, with my approval of course[whistle])
I’ll get back to you soon.
Cheers mate
Devo