I purchased my first IP 2 mths ago, the deposit and solicitor fees are against my PPOR as a Viridian Line of Credit, amount owing 11800 with 20000 limit on credit loan. I now have to pay $1700 for a hot water system (HWS) and new meter plus next quarter's rates $356 – TOTAL TO PAY $2056. Can I pay for the $2056 on the Line of Credit and still claim depreciation on the HWS plus rates expenses and also the interest payable as they were paid for by credit.
I can pay cash but prefer to put the 2056 against my PPOR as I only owe $36000 and aim to pay it off ASAP. I have all my wages except $230 a week which pays the main IP Loan, paid into my PPOR Loan which is a separate Viridian line of credit to the IP and I draw on it to cover living expenses.
I guess the question is do you have to pay expenses for IP by cash even if you can afford it or can you put the cash against your PPOR until it is paid off and at the same time claim the interest on your expenses for IP if paid for by credit?
Advice would be appreciated, am I on the right track?
You can pay any expense for your I.P's out of a line of credit.
Repairs are a tax deductible expense for the current financial year, while expenses such as the finance costs and purchase costs I believe are depreciable over the 1st five years (check with accountant on that one – my memory is a bit dim).
All the interest on the Line of Credit is tax deductible, but you will need to make sure your I.P interest and expenses are kept separate from the PPoR interest so there is no confusion at tax return time.
When you get a bit more established, it is a good idea to have your expenses from your I.P paid on your behalf by the P.M straight out of the rent.
The P.M sends you the monthly statements with the invoices for any work attached to the statement. This can be organised with a phone call, you can set the limit at whatever you like for the P.M to spend without your approval, and you will have a lot less work to do (unless you want to do it)
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