Hi everyone
I’d love to get some feedback on the following 2 queries:
(1) I have around $x,000 cash in my account and would love to get into the market with my first PPOR ASAP. This is actually saved tax money that is not due until around May 2007. It makes me nervous spending it….but I hate waiting to buy! Advice please. I will wait a few more months if that is best. My income is good (finally) but I don’t want to put myself under a scary amount of pressure.
(2) Also, I’m really keen to attend the Richmastery Property Academy, ideally late May….but I’m hesitant about spending this money (it will cost me around $4000 with flights, accom etc) before I’ve even bought my first property. Can anyone (impartial) advise if it really will help me with my first property purchase, so I am making the best decisions for me, thereby justifiying the cost of the course…or should I wait unitl I have bought my first place and then attend after that?
Very grateful for any replies!!!
Hi Brilliant star
Just an idea on your first question.
As its going to be your PPOR ( assuming a non tax deductable loan) you could use your tax savings and pay a large deposit on the property or all of it if you have enough, then come tax time borrow the money back to pay the tax bill therefore making it a tax deductable debt.
I have done this in the past and my accountant said it was ok because the money was being used to pay tax however suggest you get advice if you wish to proceed down this path.
DaveThanks Dave. I will definitley check it out.
Originally posted by Dave L:Hi Brilliant star
Just an idea on your first question.
As its going to be your PPOR ( assuming a non tax deductable loan) you could use your tax savings and pay a large deposit on the property or all of it if you have enough, then come tax time borrow the money back to pay the tax bill therefore making it a tax deductable debt.Huh? That doesn’t sound right at all?
Interest On Money Borrowed to Pay Tax 22 February 2006The tax bill arrives and you don’t have the money to pay it! A common enough situation that invariably results in the question, “If I borrow the money to pay my tax bill will I be able to claim the interest paid on the loan as a tax deduction?”
If you are a company, trust or individual carrying on a business, then you will be able to claim the interest as a tax deduction because tax is a necessary part of conducting business and is viewed as a business expense.
If you are an individual not carrying on a business, then the tax liability is a personal expense regardless of the source of the personal income that gave rise to the tax liability.
website: http://www.taxreporter.com.au
Fax: 07 5526 4430That sounds more like it. In addition, using business or company dollars to reduce your PPOR interest repayments or pay off your PPOR would surely be considered a Fringe Benefit, whould it not? Legal/Accountant types – any comment?
F.[cowboy2]Hate to say that redrawing funds from your PPOR loan to be used to fund a Tax debt is not an allowable interest deduction.
Why wouldnt you establish a 100% offset account with the money and whilst it wouldnt be reducing your principal debt it would be reducing the interest charged on the debt and therefore reduce your principal that much quicker.
Richard Taylor
Residential & Commercial Finance Broker
**NODOC loans from 6.89%**
Licensed Financial Planner
http://www.yourstatefinance.com
[email protected]
Ph: 07-3720 1888Richard Taylor | Australia's leading private lender
Looks like my accountant may have given me the wrong advise although my tax return was very complicated last year and had to go to tax attorney for advice. You should see what those blokes charge an hour. Sorry if I misled and I shall investigate further
DaveLooking at things a bit closer
“If you are a company, trust or individual carrying on a business, then you will be able to claim the interest as a tax deduction because tax is a necessary part of conducting business and is viewed as a business expense.”Brilliant Star said he saved his tax which implied to me he was running a business of some sort ie not payng PAYG tax.
Therefore he should be able to claim that expense back if he did not have the money.“Hate to say that redrawing funds from your PPOR loan to be used to fund a Tax debt is not an allowable interest deduction.”
I was’nt suggesting he borrow from the PPOR loan I meant a seperate loan however if he is not in the above category as Foundation advised then it would not be allowed. The offset account would be a good idea.
I did not in my instance use it for paying off PPOR so you might be right with the Fringe Benifit Tax (then again you could salary sacrifice), I just did not expect a bill as high as the one I got and the borrowed money was tax deductable. Overseas tax can be very complicated at times.
I can now see why I was told by my accountant it was a deductable expense.
Anyway check it out further brilliant star I’m sure there are angles there to work on.Thanks HEAPS to everyone for your replies
This Forum is so cool! By the way, I’ve changed my name from brilliantstar to sancutary – I hope you’re not confused.
You’re right, I’m self-employed….and this is already starting to sound a bit complex as a starting point in property. I think the best thing to do is probably to have the 100% offset account. The truth is that I’m acutally saving to catch up on tax that I know will be due later….which is frustrating as I’d love to use it towards property. So I still won’t be ready to buy on 100% until October-ish – maybe before.
Once thing I have learnt though is to do things at a ‘comfortable level’ and I would be much more comfortable knowing I already have my tax money sitting on my mortgage! I was hoping for an easy solution but it seems it’s not so simple!
Also, re my second question – does anyone have any feedback on that? I am currently considering buying a stack of the right books and some DVDs which will set me back around $400, not $4000. If I focus on buying a high capital growth property and adding value, then I’d like to think I woudl have a decent stash of equity 6-12 months after buying my home. Then I can REALLY get started, and myabe do the Richamstery course then. Any advice/feedback???
Originally posted by Dave L:Looking at things a bit closer
“If you are a company, trust or individual carrying on a business, then you will be able to claim the interest as a tax deduction because tax is a necessary part of conducting business and is viewed as a business expense.”Brilliant Star said he saved his tax which implied to me he was running a business of some sort ie not payng PAYG tax.
Therefore he should be able to claim that expense back if he did not have the money.Ah, but taking company/business money and placing in in a PPOR mortgage would require a “formal loan agreement” with interest paid to the business at market rates etc, etc, an administrative nightmare and something the tax office has been taking pretty seriously… and I can’t see how market rates for unsecured cash could be less than a mortgage rate… therefore it would be a pointless exercise.
Cheers, F.[cowboy2]
A serious disclaimer – I am not a financial advisor, therefore the above information should be considered generally wrong in nature.. [biggrin]
I am sure someone will correct me but couldn’t you use your saved money for the deposit then just set up your loan so all your earnings goes straight into it and then have a line of credit. I believe you have to be careful with your budgeting because its easy to spend more that is going in but that way when your tax bill is due you can pay it from this.
I have looked at the Richmastery website I think it looks pretty professional the only thing that put me off about doing the course is they are based in NZ.I could be wrong again but I kind of think that if you want to invest in Australia then you should go to things taught by Australians using our property laws etc. Then you don’t have to think oh I wonder if that applies back home, guess it is alright if you want to invest in NZ though at least you can take advantage of the stamp duty. Is this the one where Steve will be teaching? Because in that case you can ignore the above.[blush2]
Maybe you can find some way of claiming the trip as a work expense.[whistle]
Originally posted by Sanctuary:(1) I have around $x,000 cash in my account and would love to get into the market with my first PPOR ASAP. This is actually saved tax money that is not due until around May 2007. It makes me nervous spending it….but I hate waiting to buy! Advice please. I will wait a few more months if that is best. My income is good (finally) but I don’t want to put myself under a scary amount of pressure.
Notwithstanding the other comments you will also need to ensure that you do not over extend yourself in terms of your cash deposit.
Don’t forget the cash is only temporarily yours and there will come a time in the not too distant future when the ATO will want it.
If, at this time, you need all (or most) of the cash to maintain your LVR within normal lending guidelines you may find youself in a bit of a tight situation and needing to borrow through personal loan, credit card etc etc etc at higher interest rates.
(2) Also, I’m really keen to attend the Richmastery Property Academy, ideally late May….but I’m hesitant about spending this money (it will cost me around $4000 with flights, accom etc) before I’ve even bought my first property. Can anyone (impartial) advise if it really will help me with my first property purchase, so I am making the best decisions for me, thereby justifiying the cost of the course…or should I wait unitl I have bought my first place and then attend after that? [blue]
Not commenting on the merits (or otherwise) of this course – ultimately the success of a course/seminar/workshop etc is what you do with the information.
A free seminar could be just as valuable as a very expensive seminar if it results in positive and productive actions on your part.
I must admit that on a personal level I am not a fan of expensive courses – but that is just a personal opinion.
Derek
[email protected]
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Hi Sanctuary for my two bobs worth…
If you are just looking at getting into the market with your PPoR, I think your $$ would be best served in the mortgage against this property, which can be leveraged for future investments at a 5x ratio!
My own experience of other seminars, is that generally you get much more out of the presenters books (not DVDs) that are for sale elsewhere.
I have found the greatest treasure trove of knowledge available to be my local library. Can you believe they have more information than you would probably ever need to know about investment, development, town planning, buyer behaviour, markets and pretty much everything you could ever think of…and its free!
But again this is just my opinion.
I know of several people who have been uplifted and fully motivated at seminars like this one and it has turned there life around. But they are in the minority.
You need to assess where you are today on your journey, what you need to know, how you will motivate yourself and make your decision from there.
Thanks so much to everyone for your input, I’m very grateful.
Thanks to your information, I have been able to make two decisions
1) I have made a decision to purchase my PPOR ‘safely’ and NOT to use my tax money. I will wait until I have all my tax saved to date and then to get a 100% offset loan, against which I can temporarily use this saved tax money.
2) Much as I would love to do the Richmastery course, right now it’s best that I hang onto my money. I’ve going to buy a few more good books and keep reading this forum whcih I think is FAB!!!
You are all legends!!![biggrin]
Let us know how you go Sanctuary
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow Calculator
This Forum is so cool! 
You must be logged in to reply to this topic. If you don't have an account, you can register here.
