Hi
My brother & I have both just purchased an investment property due to settle prior to the end of the financial year.
Couple of questions.
We have borrowed full amount of purchase price plus costs ie stamp duty ( VIC), legals, fees.using family pledge loan.
Is it worth setting up an offset account given property is investment. I am pretty old school and like the idea for principal reducing therefore the loan is P & I.
Given property will settle prior to end of financial year are than any claimable expenses in current financial year?
Thanks
It all depends on how much spare cash you have lying around. Having two people involved may also complicate things as the offset will be in the same names as the loan.
Also, if you have a non deductible loan -eg on your home, you would be better off putting all cash into an offset on that loan as this will save you non-deductible interest.
Terryw | 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
I’d vote for the offset account..
The only disadvantage I can think of is slightly higher bank fees. but ultimately having an offset account just gives you more options in the future. Conceptually.. and offset account is the same as principle reduction, it just gives you more options in the future.
re: 2010 deductibility:
borrowing costs
interest
and rateswill be deductible.. but they’ll all be pro-rata.. (minimal)
Most good banks throw in the offset account with all the other bells and whistles at no cost. It can be a fantastic tool once you know how to use it. That being said, it may not be as effective with two borrowers- i.e who gets to spend the cash?
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