I have a newly built IP at handover stage, i want to borrow an extra 10-15g to cover furnishing and basic gardening, the bank says i should pay the extra money out of my cash funds and after handover they will do a "Top UP" of the ip loan and pay me back the cash i would have spent.
Im paranoid of corupting the loan by taking money out of it which will then be transfered into my everyday account for personal use.
how should i do this without any tax implications?
terryw or jamie can you help me out?
thanks in advance
Sorry i am not Terry or Jamie but maybe able to offer an opinion.
I think i would be pushing the Bank to do the Top up loan now rather than later.
As long as you can justify the costs thru quotes there is no reason why they would say No.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
If you use cash then you cannot take out a loan to refinance this – and claim it. ie the interest on the extra money borrowed wouldn't be deductible as it wouldn't relate to the property.
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 gents!
hmm this is exactly what i thought, and the relationship manager at commbank says he does this all the time! and its fine!
the problem i have is i dont have the timeframe to do the top up before practicle completion, and im roughly 4500 short in my loan to cover slab variations, looks like ill have to use cash which would be better served on my ppor, are there any other options?
Good to hear the Manager of the largest Bank in Australia giving advice contrary to the ATO guidelines.
Nothing amazes me these days ….
You always do a personal loan and then apply for the top up to your IP loan to repay the P/L.
That would be quicker and keep the interest deductible.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
thanks richard for now ill ask another silyl Q?
ok so i want to cover 10,000 in furnishings plus the 4,500 im short plus maybe some landscaping to do, so if i got a personal loan for say 18,000 and got the top up latter on , i can transfer that top up out of ip loan and into the personal loan and pay it out , and then all the interest will be deductable as its all used for ip, as long as i dont spend money on personal things out of this personal loan? and personal loan fees will be deductable too?
as the personal loan(higher %) would only be for a short term maybe 2 months this seems like a good option?
thanks
Yes it all boils down to the "Purpose Test" to see whether the interest is deductible or not and not the type of loan or security offered.
You coul;d take out the P/L and then at the same time apply for the Top up IP loan.
As long as the funds from the IP loan are used to repay a debt where the purpose was investment the interest will be deductible.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
One loan being refinanced with another
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
Hey guys a new twist…
Ive been told i can adjust the amount borrowed on my ppor and transfer the resultant moneys into my ip loan
eg i owe 200g on ppor i have extra payments of more than 20g so i can change loan on ppor to 180g and add 20g to loan for ip.I can then use this money for ip costs and i dont have to refinace? hows this sound?
thanks in advance
Hi Michael
I’d refer to Richards post above re the purpose test and if you have any doubts about whether the loan will be deductible then best to seek advice from a qualified accountant.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Another option which may be quicker than a personal loan may be to obtain a Credit Card to use for the property related expenses and then pay that off with from funds from the investment loan? You would then have that 'credit' facility available to you if the situation arises again. (So long as it doesn't stuff up your debt servicing ratios.)
Cheers, Tracey
You must be logged in to reply to this topic. If you don't have an account, you can register here.
