Hi all. Can anyone help?
I have a PPOR and and two IP,s. The rent from my IP,s goes onto my PPOR and I pay the interest only payments to my IP,s each month from a seperate line of credit loan.(Investment purposes only)
Obviously my interest payments associated to my IP are tax deductable however is the ever increasing interest associated to my line of credit also deductable?
I have been told that it is. Is this true?
Thanks POB
This sounds as though you are paying the interest on your I.P loans with another LOC Loan and not paying any of the interest on the LOC?
Are you paying down the loan on the PPoR as well and not paying down the LOC you use for investment?
This is called "capitalising" the interest; the tax deductible interest is allowed to accumulate while you pay down the non tax deductible debt. I believe at this point in time it is allowed by the ATO, but the argument seems to be continually raging about it,and there was a case a few years back where a guy was fighting the ATO over their ruling to disallow his tax claims when he was adopting this practice. They eventually allowed the claim, but I would err on the side of caution and not do that just in case the ATO changes it's mind again.
As for the interest on the LOC that you use to pay the I.P loans; this is not tax deductible unless part of the LOC funds were used to fund part of the purchase of the I.P's – the interest on the I.P loans is.
Marc thanks for the reply. I am paying the IP's with the LOC however I pay the minimum payment on the LOC. Hhowever thinking about it; its probably better left on my PPOR if I have enough in my LOC to get by.
I have used the LOC for the deposits on the IP's but I was interested to know whether the interest accumulating from the payments to the IP's was deductable? I thought it may not be.
Thanks
Peter
Seek the advice of a good accountant. I beleive that, if structured correctly, the interest on a LOC that is use to pay other expenses relating to property, including other interest, should be deductible.
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
Terry thanks I thought it could be deuctable the way that I have it structured however I have organised a meeting with my accountant.
Thanks again.
Peter
BTW, there is an exellent thread on this topic on the somersoft forum.
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
Terry hi thanks for that I have had a look and it is very good and very comprehensive.
Thanks so much.
Peter
Terryw wrote:BTW, there is an exellent thread on this topic on the somersoft forum.anyone have a link to this thread?
thankyou pete
found it thanx
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