I have a LOC account that I have dedicated to a new IP (when I purchase). I plan to pay the deposit and closing costs (stamp duty, legal, etc) out of this LOC (as well as future IP associated costs) so that the interest on this account is tax deductible. However, before I go ahead with this plan I would like to make sure this idea will be OK with the ATO. Does anyone know, or do this?
You would have to apply for a private ruling. This would take a while though.
Another option would be to get some written advice from an accountant.
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. Just got an email back from my accountant – he said it is fine as long as it is a designated LOC.
Yea – much rather use tax-deductible debt than non-deductible equity! Let's hope my next offer is accepted. If you are only buying in your name then using it for the costs for future IPs won't be a problem as the interest is deductible under your name. (It's when you buy in more than one name it can be a problem). The only thing I would want to know is how much interest for each investment property as I like to know what each investment property holding costs/profit is. If you can keep good records and know how much the costs are on each investment property and can calculate the interest for each one then won't be a problem.
DAMProperty | DAM Accounting Services
https://www.damaccountingservices.com.auAgreed – I can do that!
Yea – much rather use tax-deductible debt than non-deductible equity! Let's hope my next offer is accepted. 
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