Hi guys
If I take out a LOC on my existing ppor, use some of it while the house still a ppor, then change the house to a ip will this affect any thing when it changes? I know the to be ip loan will be deductable but will the LOC affect this in anyway?
Only interest on borrowings used to invest will be deductible.
So if you use the LOC for private expenses and then later for investment the use will be mixed. You would have to work out the proportions used for private/investments and portion the interest.
Where you will get into trouble is if you want to pay down the private part. Any payment to the loan will need to come off both private and investment portions in equal shares to the protortion of the loan. ie you cannot paid back the private part first (which would be more tax effective).
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. So as long as I keep records of what is what I wont affect the mortgage when it comes to tax time if just used for private borrowings?
Ideally you should keep business and pleasure separate. But it could be done with a mixed loan and the interes worked out, but this will create possible problems later when trying to pay off the private 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
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