Structuring loans for investment properties

Would anyone ever use a Line of Credit to pay off monthly loan repayment interests instead of taking it out of a normal transaction/savings/offset account? or will the banks somehow not really allowed because it too is 'borrowed' funds?

For example:

Property A – Loan – Monthly interest charges $111.11

Property A – LOC – $100,000 limit available

Property B – Loan – Monthly interest charges $222.22

Property C – Loan – Monthly interest charges $333.33

Therefore the LOC against property A with the high limit is treated as the "master" account where we normally pay for the utilities, bills, etc. can also be used to pay the Loan Interest repayments on Property A, B and C's loans? or would people normally just treat each one separate and use a standard transaction/savings/offset account to make payments to all 4 accounts directly?  

Of course, keeping in mind trying to maximise deductibility and all that too.

Terry, isn't this type of structure frowned upon by the ATO? Was there a ruling recently on something similar to this?

Or is it only if PPOR debt is involved as well as investment debt that the ATO don't like it?

Cheers

Tom

Thanks Terryw and PLC. You guys are always so quick and on the ball on these forums.

Glad that you can provide such helpful hints and advice for us all.

All these new accounts I've suddenly acquired from my mortgage broker after refinancing/restructuring was really confusing me.

Very different to the simple days I used to have things where each accounts only corresponded to its property. It was neat.

Decided to map this out in a diagram today at work to get my head around how things used to be and possible options how I can go about things moving forward (see below). Hopefully i've got things right now *fingers crossed*

https://drive.google.com/file/d/0B027-SCim7iANlJLVVJELVhOTEE/edit?usp=sharing

Let me know if you got some better tips/suggestions?

Not really, but he was explaining how he thought was best to restructure my loans/accounts I had.

He did make some comments regarding not to use my money directly to pay for expenses from my PPOR Offset account for Investment purposes directly as it wouldn't then be tax deductible. Then gave me the advice to use all the life savings I have been parking there to pay down my loan and then take out the equity via a separate LOC account which I can then use soley for investment purposes. Seemed to make sense.

Yes. I'm with CBA, so the Offset account (aka. MISA) against my PPOR is somewhat useless to use as a normal day to day transaction account.

Plus it contains a whole bunch of savings from both myself and my wife jointly.

My little hobby of property investment i'm trying now to decouple and just do on my own with my own funds/salary and properties under my name only.

My normal transaction account is just what I use on a day to day basis for like lunch, coffees, petrol and other life's what nots.

Yes to minimise the non deductability I would agree with you, but if the PPOR offset account gets mixed with my income, rental property income, wife's salary plus everything, it just gets messy (for us anyway). Every month my wife and I are just diligently transfer a lump sum of whatever we don't need from our own transaction accounts into there.

2 LOC's came about because:

a) PPOR – described above. life savings against PPOR offset, used to split out PPOR loan. This is in joint names

b) IP#1 (solely under my name) – was refinanced from original lender to new lender and revaluation enabled equity to be taken out, new LOC was opened in the hope to finance a 3rd and 4th IP.

That was just a thought that popped into my head (thats why I listed it as Option 2) while trying to figure this whole web of accounts out and how to use them properly. But I highlighted it as it didn't seem like the right way to go about it, or if it was legal to do. Hence my early post raising the question which you have clarified.

I have a question regarding the use of structures to own property.I have been reading so many differing opinions its doing my head in. If you use a Trust structure to own property,do you lose the benefit of being able to claim costs of holding the property ie interest on loan,depreciation,maintenance and so on against your income?