Using Equity as a Deposit for Investment Property: How Does it Work?

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Terryw
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@terryw
Join Date: 2001
Post Count: 16,213
March 9, 2014 - 4:02 am
jate wrote:
Terryw wrote:
Why are you paying interest with the LOC?
What I meant is that my LOC account, which is used 100% for Investment purposes only. Such as deposits for IP#2 and IP#3.
I am planning on tax-deducting the debit interest incurred on this account.
Currently CBA has it setup with the debit interest for this LOC account is being capitalised.
Is there any problems with this setup from a tax-deduction perspective?
Possibly.
If you are capitalising the interest the ATO may deny the deduction on the capitalised portion, but this will depend on the circumstances. This would probably only be a minor amount though.
Run it by your accountant.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
jate
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@jate
Join Date: 2013
Post Count: 26
March 9, 2014 - 9:55 am
Qlds007 wrote:
Hi Jate
Hate to say it seems go from bad to worse.
Think you definitely need a complete loan check.
Cheers
Yours in Finance
Hi Richard,
Thanks for your reply, but can you provide an explanation why you think my set up is so wrong?
To recap, I have it as:
- LOC (100% investment use) – used to pay deposit for IP#1 and IP#2. Interest capitalised.
- Transaction Account (100% investment use) – All rental income in, All deductable expenses out (interest repayments for IP(s), strata, water, management fees…etc)
- Loan IP#1 – Interest Only
- Loan IP#2 – Interest Only