Redraw of excess funds from a IP loan under a company structure

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Kooz
Member
@kooz
Join Date: 2006
Post Count: 39
August 24, 2009 - 5:14 am
Hi all,
To ask the question – if an IP is purchased under a Pty Ltd structure with a loan on the IP and extra payments are made over the minimum into the loan, if the loan allows, can you redraw the extra funds to use for other uses within the Pty Ltd ie deposit for other IP or simply payment of bills?
I know this gets complicated if the IP is in a personal name (as the interest on the money redrawn can not be a tax deductible claim) . Is a PTY LTD a different situation cause its a business.
Or would an off set account (which has the same effect) be less hassle?
Cheers
Karen
Richard Taylor
Participant
@qlds007
Join Date: 2003
Post Count: 12,024
August 24, 2009 - 10:24 am
Yes could be slightly complicated if you are purchasing using different entities.
To me an offset account would make life a lot easier however with a Corporate Trustee not every lender will allow this.
Richard Taylor | Australia's leading private lender
Terryw
Participant
@terryw
Join Date: 2001
Post Count: 16,213
August 26, 2009 - 12:44 pm
Hi
Firstly, it is not a good idea to buy using a Pty Ltd. You will pay more tax. (its ok if the company is trustee).
Secondly, it doesn’t matter who the owner is. If money is redrawn (borrowed) the interest will be deductible if the money is used for business purposes.
I would not pay any extra on any loan – just use the offset.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
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Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au