Hi all. Can anyone help me clear up whether a LOC subaccount (PPOR mortgage is main account) can be used to pay off not only the deposit, but also the accruing interest on an IP. All income generated by the IP would then be funneled into the PPOR loan allowing it to be payed off much sooner. I understand the recent tax ruleing stating you cannot capitalise interest. The LOC subaccount would have sufficient funds to pay the IP interest costs for 5 years allowing the PPOR loan to be paid off. All funds could then be directed at the IP to pay it off. I know if it sounds to good it generally is, and thats what this sounds like to me. This advice has come from people who are doing it.Your help would be appreciated in clearing it up. Thanks
Of course anyone can do this.
The issue is that the ATO do not allow the tax deduction of interest upon the interest accrued.
You need to speak to an accountant or seek a private ruling on this if your friends convince you that it is still a viable strategy – I would suggest they get one too.
All the best,
Simon Macks
Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Mortgage Hunter is correct…there is no tax advantage in using this strategy.
Thanks, it sure sounded to good to be true. I think I might get some advice from the Tax Dept.
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