Split loan still legal?

Viewing 7 posts - 1 through 7 (of 7 total)

diclem
Member
@diclem
Join Date: 2003
Post Count: 537
May 29, 2004 - 1:29 am
Hi Guys,
Just need a little clarification. Is the “classic” split loan structure that investors like to use still legal?
I mean:
Loan on PPOR (P & I or IO)
split with
Loan in IP (IO)
With this set up all income, including rent, goes into the PPOR loan, and all expenses come out of there. INCLUDING the monthly interest on the IO Loan. (So, interest is not accruing, but balance on IP doesn’t reduce either)
Is this still allowable from the tax office point of view?
Thanks,
Sue [eh]
“Be careful not to step on the flowers when you’re reaching for the stars”
diclem
Member
@diclem
Join Date: 2003
Post Count: 537
May 29, 2004 - 1:35 am
Wow, that was quick [biggrin]
Thanks,
Sue
“Be careful not to step on the flowers when you’re reaching for the stars”
Traci-lee
Member
@traci-lee
Join Date: 2003
Post Count: 21
May 29, 2004 - 3:17 am
HI,
So I can still use the redraw in my PPOR as a deposit for my IP and claim the interest on the deposit amount. I was told i could no longer do this?
Mortgage Hunter
Participant
@mortgage-hunter
Join Date: 2003
Post Count: 3,781
May 29, 2004 - 3:23 am
Traci-Lee,
This is fine. Yo uneed to ensure that it is listed as a split on your statement. If it is all one loan then you will need to pay down the whole loan, including both “borrowings” at the same rate.
A split is the best way to do it and your bank will set it up for you.
Cheers,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985
Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Traci-lee
Member
@traci-lee
Join Date: 2003
Post Count: 21
May 29, 2004 - 3:31 am
Thanks Simon
Traci-lee
melbear
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@melbear
Join Date: 2003
Post Count: 2,429
June 1, 2004 - 5:43 am
Rob, I would argue that it does have to be a split, not just for your accountant.
If you are paying extra off the loan (even P&I means paying extra), then the ATO (so I believe) will see it that you are also paying down the IP portion too.
ie. if you have $90K owing, borrow $10K for the deposit, with a split you would have the two loans, and pay extra off the $90K portion. If it is not split, and you pay $1K extra in, the tax office says you will have paid $900 off the PPOR, and $100 off the IP bit. Nightmare, and certainly not what was intended….
Cheers
Mel
Mortgage Hunter
Participant
@mortgage-hunter
Join Date: 2003
Post Count: 3,781
June 1, 2004 - 6:49 am
I am with you Mel.
Cheers,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985
Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.