Yes, it would work out exactly the same from an interest point of view. So it wouldn't really matter if it went into the offset first or into the loan first, the interest would still be the same assuming you leaving in the offset during this time. You would set up the direct debit from the offset into the loan.
There are probably 2 main reasons why you wouldn't put it straight into the loan.
1. The amount of rent will vary each month and in some months may not be enough to cover the loan.2. Any money you place into a loan is a repayment. When you take it out (ie use redraw) it will be new borrowings. The interest on the new borrowings will only be deductible if the money is borrowed for investment purposes. So you should never put extra into a loan as it will cause tax problems if you want to tax it out.
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
Hi Carlito,
The reason for this is that it preserves the deductibility of the loan, whilst still reducing the interest.
This means that if you need to use the offset money for something later on, you don't need to do a re-draw from the loan (which may not be tax deductible if you are using it for personal use).
Hope this makes sense. Let me know if it doesn't and I will explain further.
Thanks Terryw thats makes sence and gives me better understanding.
I'll have to buy you a drink or two!!!
Can I ask you should I set up an family trust before I buy my next IP? I'm not sure if do I or don't need it.
What do you recommend or is this more of a tax issue?
Carlito
You should seriously look at using a discretionary trust. Many issues to consider though
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
Thanks YI for your comments!
Ok Terry I'll look into it
Thanks once again.
Carlito
Richard,
Can I ask you how would you restruture the deal/deals going forward as per your comments previously about restructuring my deal and starting a fresh?
Thanks again
Carlito
You have a free Residex Property Report, can I email you to receive a copy?
Hi Carlito
Sure drop me a line and I would be happy to email you a Residex report for any particular property .
Just need the actual street address.
Richard Taylor | Australia's leading private lender
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