Hi,
I have a Line of Credit investment loan. I wanted to find out where I should deposit the rental income. i.e. Directly into the LOC loan or into a seperate account and then transfer it regularly across?The reason for this is the tax implications in reducing the mortgage and the interest I can claim as a tax deduction.
Thanks.
If you pay straight away you will pay less interest.
If you pay later, you will pay more interest and only get back less than half of that from the ATO (up to whatever tax rate you are on 48% max).
The less interest paid to bank, the better.
Remember to pay off your own home, before paying off investment properties as you can’t claim interest on your PPoR.
cheers
Live, Learn and GrowLifexperience
The point of a LOC is so you can deposit as much as you can as quick as you can and still have access. However, this doesn’t work to well on investments if you want to withdraw money for personal items later on.
Each deposit is considered by the ATO as a repayment. Each withdrawal is new borrowings. So if you put money in, you should not take it out again, unless for investment purposes such as repairs, paying rates, insurance etc.
It is probably best to just pay the interest each month, and put everything extra off your home loan (if you have one) or better still, in your offset account attached to your home loan,
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
Click below to email meTerryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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