Hi all,
I got an investment loan with an online financial provider.. The bank account is linked to my saving account with another bank… My investment loan provides me with a redraw facility.. (this is not an offset account)…
Is it possible for me to park my surplus cash in the investment loan account and withdraw the money as needed to my linked account when I need.
This will be best approach i think as I will save interest on the surplus cash till I need to use it..
Is that going to me issue with Tax man..??
Can someone please provide me with some suggestions.
Thanks
Its possible. But will disadvantage you by reducing your tax deductions.
Every deposit is a repayment. So When you withdraw the money again the balance will go up but the extra interest will not be deductible (unless the money withdrawn was used for investment).
You will end up with a loan where hardly any of the interest is deductible..
I wouldn't do it. Get a loan with an offset, or better yet, pay down personal debt first.
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
Terryw, what if the loan is on a PPOR, then changes to a IP..
example would be owe $200k then redraw has $30k…. you withdraw the $30k (spend it..) and only make the IO payments, the next financial year you move out the property. .
the loan total is now $230k with zero redraw and is now a IP.
is the $230k deductible?
no
You will have two loans, $200,000 and $30,000. Interest will only be deductible based on the purpose of the borrowings. If $30,000 was spent on the property it might be deductible.
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
but that redraw is build up from additional payments?? so your taking back the extra money you put in…. and the total loan goes back to $230k…
also what happens when you refinance? how does the ATO know what the loan amount was and whether extra funds were taken in and out before the property was an investment..
my problem is my PPOR loan doesn't have an offset account…. unless i change products which is $199 yearly fee and 0.3 higher interest rate… which is about -$700 a year….
i've got $30k inheritance and dont know where to park it..redraw = reborrowing.
deposit = repaymentDeductibility depends on the purpose the funds are used for.
ATO may never find out of course. They do sometimes send out questionaires to property owners asking a number of questions including asking if any loans have been increased.
Do you mean you will pay more interest for the loan with the offset? if not it may be worth changing. Your loan should be interest only too.
Do the sums, maybe it is worthwhile putting the money in an ING account in the name of a low income earning spouse if you have one.
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
Terryw wrote:Do you mean you will pay more interest for the loan with the offset? if not it may be worth changing. Your loan should be interest only too.Do the sums, maybe it is worthwhile putting the money in an ING account in the name of a low income earning spouse if you have one.
thanks terryw.. yes the loan with offset account is 7.04% (plus $199 per year) vs 6.74% and no fees….
so it doesn't look like its worth changing… i have asked ING about it saying i'm looking at leaving, waiting for a call back..my spouse is on a low income, so i might start putting all the savings into an account in her name…
may as well leave the redraw i have already build up there… (about 7k)..You are ahead in your repayments so you could ask your lender about a repayment holiday for 6 months. let the loan capitalise up a bit – only necessary if you are going to move out soon. better to have $7k for the new home than the old.
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
thanks Terryw, but I won't be moving out for another 2 years…
the place is already well in positive, but obviously i would like the loan to be as high as possible… its a shame i didn't know about this before, as i've paid the loan some 30k down over the last 5 years.
Never mind, the interest on $30k won't be too much. Just don't pay down any more.
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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