All Topics / Legal & Accounting / Prepaid interest

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  • Profile photo of w8upw8up
    Member
    @w8up
    Join Date: 2010
    Post Count: 15

    I am thinking of prepaying interest on my investment loan to reduce tax for 2012-13 as may have a lower taxable income next financial year. I have a lump sum of money in offset account,which would cover the prepaid interest payment, but would like to preserve this possibly going to buy a PPOR in the near future. Do you think the tax department would have a problem with borrowing money to pay the prepaid interest (e.g. from an unused line of credit account that I have in place) or via redraw facility from the investment loan – to my mind, both these options would involve compounding interest, which I understand is an "iffy" area in terms of claiming tax deduction if the main reason is to reduce tax. Prepaying the interest also allows me to take advantage of a discounted rate, however (4.86%) for 1 year fixed with CBA. Any ideas or thoughts on this arrangement, or would I be safer to pay the interest amount with money from the offset account?    Thanks w8up

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    It all depends on your situation and how you structure it. You should seek tax advice.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of w8upw8up
    Member
    @w8up
    Join Date: 2010
    Post Count: 15

    Thanks Terry, I already asked my accountant, but he was a bit vague with his answer, and I got the impression that he wasn't really too sure, hence me posting on the forum. I might have to try to pin him down on the answer.  Cheers

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Its not a simple ues or no answer. Ask him for some formal written advice and see what he says.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    Hi w8up

    where are you located? Sounds like you may benefit from speaking with another accountant.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of w8upw8up
    Member
    @w8up
    Join Date: 2010
    Post Count: 15

    Hi Jamie,  I'm in Adelaide 

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    From memory, I think Dan who has a simpsons character avatar is an accountant in your neck of the woods. Always a good contributor so would be worthwhile getting in touch with.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213
    Jamie M wrote:
    From memory, I think Dan who has a simpsons character avatar is an accountant in your neck of the woods. Always a good contributor so would be worthwhile getting in touch with.

    Cheers

    Jamie

    That character is “Disco Stu”!

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

Viewing 8 posts - 1 through 8 (of 8 total)

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