Gday everyone,
It’s a happy place to be when one can find a forum with like minded people!
I have a question that could do with some answering please.Here’s my scenario:
I have a personal credit card with a high amount of credit available and I have been using this card for my personal expenses
I also have an unused flexi loan available.
Apart from my cash savings, I intend to use the above credit available to purchase an IP overseas (not able to get a loan here to finance IP).My question is:
Can I still deduct on the interest payable if from the point of property purchase, I stop using my credit card for personal expenses and only for my investment property? I will be declaring my income earned from overseas.
As there is a clear nexus for my flexi loan to the IP, the interest payable should definitely be deductible too yes? I will only use the loan for the IP and nothing else.I am purchasing the property under a trust (for asset protection amongst other things) and as I understand it, the negative gearing can only be held under that trust and cannot be netted against my personal taxable income? The tax losses can however, be carried forward indefinitely until the IP is positively geared?
Am I 100% correct on this?Is it also true that overseas income may not necessarily have to be declared if the funds are not repatriated back to Australia?
I will undoubtedly be checking with my accountant too but would not mind some clarity when I speak to him next week.
Greatly appreciate the assistance.
I.Prop wrote:Gday everyone, It's a happy place to be when one can find a forum with like minded people! I have a question that could do with some answering please. Here's my scenario: I have a personal credit card with a high amount of credit available and I have been using this card for my personal expensesSo it has a private loan purpose amount of debt already on it which makes it messy to determine which part is for investment and which part of the debt is for private purposes.
I.Prop wrote:I also have an unused flexi loan available. Apart from my cash savings, I intend to use the above credit available to purchase an IP overseas (not able to get a loan here to finance IP). My question is: Can I still deduct on the interest payable if from the point of property purchase, I stop using my credit card for personal expenses and only for my investment property?maybe if you pay off the private debt off the credit card ! Before using it for that purpose.
I.Prop wrote:I will be declaring my income earned from overseas. As there is a clear nexus for my flexi loan to the IP, the interest payable should definitely be deductible too yes? I will only use the loan for the IP and nothing else. I am purchasing the property under a trust (for asset protection amongst other things) and as I understand it, the negative gearing can only be held under that trust and cannot be netted against my personal taxable income?Ask the accountant if you can use a hybrid trust and if you can borrow money to buy units in a PIT that may or may not be able to be negatively geared against other income.
http://www.trustmagic.com.au/inf/Hybrid-Trusts.pdf
https://www.propertyinvesting.com/forums/getting-technical/legal-accounting/4328668I.Prop wrote:The tax losses can however, be carried forward indefinitely until the IP is positively geared? Am I 100% correct on this? Is it also true that overseas income may not necessarily have to be declared if the funds are not repatriated back to Australia?Depends on if you have to pay tax in the country you earned the income from and what sort of Tax treaty exists between the two countries.
Usually has to be declared as Foreign Income and Foreign tax paid on tax return.
If you are deemed an Australian Resident by ATO and earn money in another country you can still be taxed by OZ.
http://www.ato.gov.au/individuals/content.asp?doc=/content/28908.htm
http://www.ato.gov.au/businesses/content.asp?doc=/content/64494.htm
I.Prop wrote:I will undoubtedly be checking with my accountant too but would not mind some clarity when I speak to him next week. Greatly appreciate the assistance.That would be a good idea as foreign income can be complicated to know how it will be treated and tax rulings on hybrid trusts can also be tricky and could be knocked back by the ATO.
Thanks for replying duckster. Yes I should have mentioned that the credit card is paid down to zero monthly. And if the credit available is used for part purchase of the IP, then I will no longer use the card for personal expenses.
If I were to do it then, can the interest be tax deductible?
With regards to hybrid trusts, I have asked around and a few banks are already saying they are not willing to lend on a hybrid trust.
However, those were very preliminary meetings I had with the banks. Do you know of banks who have successfully loaned to a hybrid trust?As always, any help would be fantastic.
I've just realised that since I am purchasing my IP overseas (US) then I may be liable for capital gains on the sale of the property won't it?
I have researched that there are no capital gains in the state I am purchasing. However, since I am claiming deductions from the unsecuritized loan I took in Australia, then surely any profits from my US property will also be assessable?
And hence since Australia has capital gains tax, does that mean that by ATO's standards, I will also have CGT on the sale of my US investment property (regardless of duration held)?
I'm also still a little unclear as to whether I can deduct the interest component of my credit card if I choose to draw down its credit and also use it to purchase my investment property?
I currently use the c/card for personal purposes only and pay down in full monthly.Any kind souls out there would like to offer ideas/thoughts please?
Thanks v. much.
In Australia you will need to declare all overseas income, whether it is brought back or not.
You will have to pay tax over there, but should receive a credit for that tax when you do your australian tax return so you won't be taxed twice.
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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