Hi Guys
I have just bought my 1st IP. I would like to know ATO guidelines in regards to rent deposit. Can I get tenants to deposit rent in my PPOR Loan (non-tax deductable) to reduce everyday balance OR ATO won't allow me to use rent to reduct non-tax deductable debt and take tax deduction on interest accumulated on the IP Loan.Thanks
AmanYou can put your rent where you want to. Best to put it into a 100% offset account attached to your home loan
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 have two IPs each with an IO loan. When I asked my accountant about using the rental payments to pay off my PPOR he suggested that I should make an application to the ATO for a private ruling; the issue for me is that the size of my IO loans could potentially increase while I use the rental income to pay off my home. I didn't apply for the private ruling, not wanting to shake the hornets nest.
I would be interested to read other responses to this query.Do you mean you will not pay the interest on the IO loans, but let them capitalise?
There is a tax ruling which says capitalised interest retains the character of the main loan.
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 think you still have to pay interest on an IO loan. Trev, how could the size of your IO loan increase if you still pay your interest .
Terryw, Is it possible to setup loan in such a way to let Interest capitalize and direct all income and rent into PPOR loan. I asked my accountant and he advised this would not be possible in Australia (Possible in US)
Thanks
amsaini15 wrote:I think you still have to pay interest on an IO loan. Trev, how could the size of your IO loan increase if you still pay your interest .Terryw, Is it possible to setup loan in such a way to let Interest capitalize and direct all income and rent into PPOR loan. I asked my accountant and he advised this would not be possible in Australia (Possible in US)
Thanks
Yes, it is possible in Australia. Some have applied for private rulings and been successful. You just have to be careful that you are not doing it as a scheme to avoid tax.
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
Hi amsaini, the two properties are negatively geared. The rental pays off part of the interest payments and the remaining interest debt accumulates.
Trev wrote:Hi amsaini, the two properties are negatively geared. The rental pays off part of the interest payments and the remaining interest debt accumulates.I wasn't sure if you can let remaining interest debt to accumulate while directing all payments into PPOR loan as ATO will see this as a scheme where we are paying off non-tax deductible debt while letting tax-deductible debt to grow. So if you have this arrangement, without the private ruling, you would not be able to claim deductions on increased interest component of your loan?
Terryw wrote:Yes, it is possible in Australia. Some have applied for private rulings and been successful. You just have to be careful that you are not doing it as a scheme to avoid tax.Terryw
Terryw, I would believe the only purpose of interest capitalisation is to claim more deductions while paying off your PPOR. What can be another reason for this to explain ATO? Thanks
cashflow.
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
You must be logged in to reply to this topic. If you don't have an account, you can register here.
