If you happen to be buying a number of properties over a short period of time under a negatively geared approch. Then if you were negatively gearing your income enough as to reduce your taxable income down to 6000 (tax free theshold). Are you able to then take loans out against your line of credit in order to live on?
If so then what are the implications on your tax return?
For example 15c in a dollar is 15% which when negatviely geared in property is a saving against your loan. You take out a loan to fund basic living expenses which costs 7%. So if you pay your loans back within two years it should cost you 14%.
You can generally use a LOC for any purpose once it is established. But, check the loan agreements – you may find the bank can call in the loan at anytime.
But interest on money borrowed for living would not be deductible. Why not live in rents instead and then borrow for investment costs.
BTW, you can actually earn $16,000 and pay no tax because of the low income tax rebates.
( i don't understand your last sentence)
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 Terry, dont worry about the last sentence. It makes sense to me. Thanks for the advice on low income tax rebates.
Thats a new thing that went through in 2010 isnt it?The low income tax rebate has been around for years.
Previously kids could get the rebate and earn up to $3,333 (eg trust income) without paying tax, but the recent budget changes mean this figure is now reduced to $416pa
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
Thats interesting. Here is the calculator.
http://calculators.ato.gov.au/scripts/axos/AXOS.asp
So if you negatively gear your income right down to 16,000 then you would pay no tax on the first 16,000.
Do you have to apply for and put a form in for the low income tax rebate, or does it go through automatically?
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