Hi ,
Going to ask my account aswell- but though I might pick brains here:
I am furnishing my rental place to get higher rent – is it ok to finance the costs from the IO loan and then claim the interest?
That way I don't have to use my own saving and can claim the interest on the borrowed money. Infact – can I do this for all IP related costs/purchases?
Thanks in advance!!
Anyone?
probably best to post in the accounting forum to get clarification on this.
Hi icecric
Might be an idea to confirm your intentions with your PM as well.
If your property is either a studio / 1 bedroom you may achieve higher rent.
If the property is a 2 Bedroom +, having it fully furnished can detract from your property.
Eg. If you already own your own furniture, would you pay extra to live in a property where you couldn't use your own furniture ? To take it one step further, where you then have to pay again to store your own furniture for the duration of your tenancy…
Matt
So are you asking to increase the loan? Or is some paid down?
If it's investment related (as the furniture would be) you can claim interest on the purchase. You can also depreciate the furniture.
Yes it is generally better to borrow to pay for all investment related expenses, including furniture.
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
Terry, do you essentially get a "double deduction"? Is that possible?
Say, draw from your line of credit to pay for new carpet.
You claim depreciation on your carpet, as well as the extra interest on the loan?
A key component of the philosophy of an interest only loan is to hold onto an investment property that should increase in value over time.
Using an interest only loan to buy furniture/carpet etc means your debt level will be greater than the value of the underlying 'asset'
Think carefully about this one and consider the bigger picture.
MRCCON wrote:Terry, do you essentially get a "double deduction"? Is that possible?Say, draw from your line of credit to pay for new carpet.
You claim depreciation on your carpet, as well as the extra interest on the loan?
Yes. And the cash you would have used to purchase the carpet would go into your offset account on your deductible home loan which would save you interest.
So you are saving non deductible interest and maximising deductible interest
Saving tax in 2 ways.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
Yes- understood. I have non-deductable PPOR debt where the "cash" will be kept…all investment related costs via IO loan…
MRCCON wrote:Terry, do you essentially get a "double deduction"? Is that possible?Say, draw from your line of credit to pay for new carpet.
You claim depreciation on your carpet, as well as the extra interest on the loan?
Not really a "double deduction" – you claim the depreciation based on the depreciation value of the principle ( original amount) …and you claim the interest on the extrra interest you are paying to the bank ( not the original principle amount)
Mick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
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