All Topics / Legal & Accounting / Using equity from investment Properties to pay off

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  • Profile photo of 49houses49houses
    Participant
    @49houses
    Join Date: 2004
    Post Count: 1

    Can anyone tell me i we can legally draw down on equity from investment properies to pay off our home and still claim the interest as a deduction. If invest. prop loan is 100K then 2ook after using the equity can one claim interest paid on 2ook or only on 100k.

    Profile photo of Mortgage HunterMortgage Hunter
    Participant
    @mortgage-hunter
    Join Date: 2003
    Post Count: 3,781

    If the purpose of the drawing is for personal debt such as a home then the loan is not deductible.

    I suggest you sit down with an accountant to see if there is any way you can restructure your ownership.

    Cheers,

    Simon Macks
    Residential and Commercial Finance Broker
    [email protected]
    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.

    Profile photo of Robbie BRobbie B
    Member
    @robbie-b
    Join Date: 2004
    Post Count: 2,493

    There is no legal way of doing this. Paying off non-deductible debt regardless of the source of the funds results in the cost of those funds remaining non-deductible.

    Look at alternative structuring to pay your loan down quicker. It is pretty amazing what can be done with some minor changes to how you pay your loan.

    TMA


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    Profile photo of Mortgage HunterMortgage Hunter
    Participant
    @mortgage-hunter
    Join Date: 2003
    Post Count: 3,781

    Rob,

    As you know you can change ownership and take out new loans with as much as possible being against the IP.

    Be very careful as you will incur SD and CGT. It may not be worth the cost to set up.

    Cheers,

    Simon Macks
    Residential and Commercial Finance Broker

    [email protected]
    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.

    Profile photo of Robbie BRobbie B
    Member
    @robbie-b
    Join Date: 2004
    Post Count: 2,493

    Yep. That is why I buy property in a company name. If I want to live in it, I just ‘rent’ it from the company. I have never owned a PPOR.

    The stupidest thing I ever done was buy land which, I was advised, is non-deductible until I put a structure on it. Never again!

    TMA


    http://www.email4money.info
    Investor Links
    First Home Buyer Website


    Profile photo of RegrowRegrow
    Member
    @regrow
    Join Date: 2004
    Post Count: 77

    TMA

    There is a recent post titled NO INCOME FROM PROPERTY -DEDUCTIONS YOU CAN CLAIM by MIKALA in regards to land deductability whilst building here is the link

    https://www.propertyinvesting.com/forum/topic/18518.html

    I have confirmed this with my accountant as well.

    Regards

    Regrow

    You are a fool for 5 seconds if you ask a question, but a fool for life if you don’t.

    Profile photo of Robbie BRobbie B
    Member
    @robbie-b
    Join Date: 2004
    Post Count: 2,493

    Thanks regrow. Looks like I am still screwed as it has been more than 12 months and construction has not started. I can always work it out later when I eventually build and back-date any available claims. May even end up working tax-free for a few years when considering the amount of interest I have paid.

    TMA


    http://www.email4money.info
    Investor Links
    First Home Buyer Website


    Profile photo of redwingredwing
    Participant
    @redwing
    Join Date: 2003
    Post Count: 2,733

    Hi TMA..

    I was told by my accountant that buying in a company name was probably not the best entity for my personal situation when investing..however a trust would be better suited..?

    What benefits do you see with the company structure if you dont mind me asking?

    REDWING

    “Money is a currency, like electricity and it requires momentum to make it Effective”
    Count The Currency With This Online Positive Cashflow Calculator

    Profile photo of Robbie BRobbie B
    Member
    @robbie-b
    Join Date: 2004
    Post Count: 2,493

    I just find it cheaper to operate and more flexible than a trust. I also utilise the trust structure in some cases.

    TMA


    http://www.email4money.info
    Investor Links
    First Home Buyer Website


    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    TMA

    I have also heard that if your company is incorporated in Victoria, then it is possible to sell a proeprty by transfering the shares in the company without incurring stamp duty. Apparently doesn’t work like this in all states however.

    Terryw
    Discover Home Loans
    North Sydney
    [email protected]

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of charanacharana
    Participant
    @charana
    Join Date: 2005
    Post Count: 1

    Hi folks, I am very interested inj finding out some more about renting a property from my own company. I found your comments TMA extremely intertesting. Can you tell me more, how dificult is is to transfer a property from an individual to a company?

    Charlie

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Charlie

    Its easy. But, You have to sell it to your company = CGT, Stamp duty, and legal costs.

    Terryw
    Discover Home Loans
    North Sydney
    [email protected]

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of grossrealisationgrossrealisation
    Member
    @grossrealisation
    Join Date: 2005
    Post Count: 1,031

    hi all
    with regard to the company against trust.
    any accountants put there.
    I was of the opinion that when you sold a property out of the company that capital gain was at 42% were as trust if setup correctly is substantally less.
    also as I have read there is different rules for company transfers with in different states.I will have a look at this its very interest.
    tma you may have alook at your cost of selling if they stay in a company mine are multiple trust but reading this web site I’m glad not in vic.

    here to help

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    I beleive companies do not pay CGT. Any profit owuld just be taxed at 30%.

    Terryw
    Discover Home Loans
    North Sydney
    [email protected]

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of kpkp
    Member
    @kp
    Join Date: 2004
    Post Count: 509

    Not quite Terry,
    Companies are not eligible to any CGT concessions ( ie…50% CGT discount after 12 months)therefore any profit from the sale of an asset is fully taxed, but at the company rate.

    A trust or individual may be elibible for a CGT discount of 50% depending on certain conditions ( its a tax law…so it gets very grey)

    So in fact you may still be better off paying tax on profit with a 50% CGT discount at the top marginal tax rate compared to paying tax at the company rate.

    kp

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