Hi
Can I please have people’s views on this
currently have investment loan. Have approval to draw on available equity to 80% LVR for possible deposit on another investment property.
Have a separate loan approved for the remainder of the purchase.
Are than any issues ie: tax- if I draw down these funds and place straight into an offset account or likewise a supp loan and place in offset also?
is there an issue if I don’t purchase for another year or so but have done the above.Thanks in advance.
Yes.
Ideally you should have a separate split on your loan for taking out the 20% deposit. If you don't you will be mixing business and personal loans and every repayment you make to your home loan will also be paying off this debt which will reduce your tax savings.
There will also be issues with you borrowing money and placing into an offset. If you subsequently take these monies out and invest the interest may not be deductible as you may be breaking the connection between borrowing and investing – by placing in a savings account the funds will no longer be borrowed, but cash savings.
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 Terry, If Figc places the funds obtained in equity into an offsett on that home, and does not utilise the other loan until required, do this avoid your concerns?
(sorry Figc to interupt your thread – I trying to learn)
nope.
The equity portion will still be borrowed from the personal loan and this will be mixing business and pleasure. Also this may cut the connection with using borrowed funds. Remember interest is only deductible if the funds are borrowed. Once they are in a savings account they are no longer borrowings.
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
Terry
I do not have a home loan. All loans will be investment.Does this change things.
Was discussing this with my lender yesterday, they don't have the concept of a Line Of Credit, for investors like myself what they do is create a standard IO loan draw down the funds and dump it in the redraw for you to use as you need, would this situation be different because the funds are put in the redraw instead of an offset?
Figc wrote:Terry I do not have a home loan. All loans will be investment. Does this change things.Hi Figc
Yes, that would make things different.
If you take money out of an existing investment loan the interest is deductible anyway, so you are not mixing personal and private. So there should be no issues with apportioning interest etc.
Just watch out for the offset bit.
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
cmason wrote:Was discussing this with my lender yesterday, they don't have the concept of a Line Of Credit, for investors like myself what they do is create a standard IO loan draw down the funds and dump it in the redraw for you to use as you need, would this situation be different because the funds are put in the redraw instead of an offset?That should be ok, it will work similar to a LOC. If the money is withdrawn and placed back into the loan the balance will be nil. its like you have repaid the loan. Then you later withdraw it when you need it and it will be new borrowings
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
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