living of equity

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

grant7
Member
@grant7
Join Date: 2006
Post Count: 59
January 31, 2006 - 5:02 pm
Hi all,
After reading a few lengthy posts on this subject (quite a touchy subject – better than reading a novel!) I have a simple question.
In the not to distant future I will be using equity to live of and fund futher developments. I have read others statements that because one doesn’t now have a income (as such) they use low doc loans?
However if I draw down on my equity to live on as I understand it is not taxable income, if you were to state this as income on a low doc loan the ato might not necessarily see my point of view…
So how do people live on equity and use low doc loans???
Mortgage Hunter
Participant
@mortgage-hunter
Join Date: 2003
Post Count: 3,781
February 1, 2006 - 1:37 am
Some of my clients prefer the NODOC loan to 70%.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985
Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
grant7
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@grant7
Join Date: 2006
Post Count: 59
February 1, 2006 - 3:02 am
Can you do construction loans with no doc?
Thanks
Grant
hb
Member
@hb
Join Date: 2005
Post Count: 179
February 1, 2006 - 12:11 pm
Hi Grant
“the ato might not necessarily see my point of view”
Not only won’t they see you point, but they have now confirmed it in LAW, after the Hart Case that went all the way to the High Court.
a bit of reading material re these loans
http://www.ato.gov.au/corporate/content.asp?doc=/content/mr2004034.htm
if you mix Non deductible and deductible amounts together…you’ll keep your accountant very busy $$$$$$$$$$$
and a ATO tax auditor busy….
i know…i had a sales tax auditor sit there for 3 weeks going thru every invoice, and finally concluded that i owned them $40
easiest way for accountant/ato is to take out 2 loans…
1. personal…non tax deductible
2. investment…deductible
or alternatively, start a company, borrowing the money in it, pay yourself a salary.
Just remember, the company will then also have to pay FBT, PAYE tax, Super Contrib etc, etc….LOTS MORE PAPER WORK
Terryw
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@terryw
Join Date: 2001
Post Count: 16,213
February 1, 2006 - 1:31 pm
HB
Grant was talking about Low doc loans. The Hart’s case was about capitalising interest on an investment loan while paying off a home loan quicker.
Can’t see how they relate.
I also agree that not mixing personal and investment loans. But it is still possible to live on equity by taking out a low doc loan, and living on that money – without claiming the interest.
Terryw
Discover Home Loans
Parramatta
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hb
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@hb
Join Date: 2005
Post Count: 179
February 1, 2006 - 1:48 pm
Thanks terry
i’ll put my glasses on
hb
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@hb
Join Date: 2005
Post Count: 179
February 1, 2006 - 3:14 pm
ah thats better
good reason to be careful grant7
“If you have a low documentation loan, be aware the Australian Tax Office is watching closely. The ATO has launched a data matching program that will match the income declared by taxpayers to the ATO, against information provided to financial institutions. The following financial institutions form part of the initial program: PMI Mortgage Insurance Ltd; St George Bank Ltd; GE Mortgage Insurance Company Propriety Ltd; Australia and New Zealand Banking Group Ltd; Westpac Banking Corporation; and Suncorp-Metway Ltd.”