Hi.

Yes, I am not yet licenced to give financial advice yet (planning to be eventually), but can give legal and credit advice. Richard, I am looking at PIS who you recommended way back for my AFSL.

For Aosv, you should really look at possibly getting your spouse restructured for business into a trust structure of some sort. Another trust can then be set up for the purchase of property and it there is a loss then the business trust could distribute to the property trust to offset the loss and overall to save tax. Negative gearing in a trust.

Watch out for land tax issues.

Its not wrong to pay down loans – it is good, but it could be more effective if you don't and restructure things slightly. If done properly it shouldn't cost any more in interest but can result in more tax savings.This

week I met a client and within 5 mins I had saved him about $5000 pa in tax by rejigging things with potentially much more savings down the track.

Claire, both you are your partner can only claim one CGT exemption between you (if you mean spouses, defacto included).

If as above then probably best to just keep IO with all cash going into 1 offset account. Take the cash with you when changing residences – make a new offset on the one you are living in.

You may also want to consider your different taxable incomes. Maybe better to keep the cash in the offset account on the house which is owned by the lowest income earner.

Hi Claire,

How long will the cheap accomodation last?
Have you ever lived in one of these properties? Thinking main residence CGT exemption.
Will you or is it likely that any of these would ever be lived in?
Generally get a LOC on the one with the most equity. You can go to 90%, but as all of your debt is deductible this may not be so much of an issue.

I generally am not in faviour of prepaying as:
1. You need to fix for 1 year
2. You are really only bring forward deductions so could have a biigger problem next year if not much to claim.

But it will depend on your interest rate and outlook, the numbers and the situation.

Simple really

Have an offset account on your PPOR. Get all rents paid into this account and all wages and income.

Then just direct debit out to the various loans when interest is charged.

Ideally also have a LOC in there somewhere. You can then borrow to pay all expenses related to the property, except interest. This will help you save non deductible interest.

Use a credit card to pay for the expenses first and earn points and take advantage of the interest free period to save yourself even more non deductible interest. Before this card incurs interest you pay it off from the LOC (refinancing one loan with another).

Yes, BFA is really the only way to protect. Costs a fortune because of the risks involved. $2k to $5k for a simple one. These can be done pre/during/post a relationship so it is not too late.

Just because she is 'renting' this doesn't mean she cannot claim. Probably has no effect if she is in a relationship with your mate.

Of course the other option is to break up before 12 months…

Yes, if redrawn money is used for investments then little problems for the moment. Problems can occur if down the track one proeprty becomes a main residence or perhaps one property sold.

Bank will treat as one big loan. You will have the burden of apporitoning interest.

To keep it simple, so you had a $100,000 loan for an investment property.
You thought you would save interest by parking your $20,000 savings in the offset/redraw.

1. If it is an offset
You pay interest on $80,000. This is fully deductible

You later take out $20k to use as deposit on the new PPOR you will buy.
Interest on the loan is now $100,000. This is fully deductible.

or
2. If it is a redraw
You pay interest on $80,000 and this is fully deductible.

You later take out the $20k to use as deposit on your new PPOR.
This is treated as new borrowings.
Because it was borrowed for a private expense the interest on this loan is not deductible.

So now you have a loan of $100,000 but only interest on the $80,000 part is deductible.
This mistake has cost you about 5% x $20,000 = $1000 in lost deductions each year.

Furthermore now you have created a mixed loan. Your $100k investment loan is part investment and part personal. This creates further problems, especially if you were to try to pay off the private portion first – it is impossible. You would have complex mathematical calculations to do in apportioning interest and the only way to fix it would be to split the loan into 2 and start again – once you calculate the exact portions.

Imagine having an extra $1000 in deductions each year for 30 years, this would greatly help pay off your home loan sooner.

Be very wary of off the plan.

Also generally only 1 offset account is needed, unless your cash will exceed the loan amount. Or maybe the properties are going to be in different names.

Is the offset account an offset account or a redraw account called an offset? There could be a big effect if the loan is investment related.