All Topics / Finance / Restructure loan or not

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  • Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    HI SG

    Yes Qu makes sense and Yes you can.
     
    I would probably prefer to see the LOC funds drawn down into the offset account and the monthly interest come out from there.

    Richard Taylor | Australia's leading private lender

    Profile photo of stargazerstargazer
    Participant
    @stargazer
    Join Date: 2002
    Post Count: 344

    Hi

    I would probably prefer to see the LOC funds drawn down into the offset account and the monthly interest come out from there.
    Just some finer point re ATO. 
    If my wages and all my personal bills are paid from this OFFSET account and also my rents and my investment properties bills are paid from the same account  Isnt this then mixed if i draw down the INVESTMENT  LOC amount into the OFFSET account. 
    The draw down would not be for investment purposes….

    For the purpose of discussion if i kept my PPOR as is and stayed would i then would this set up require 2 offset accounts one for PPOR and one for INVESTMENT PROPERTY.

    Am i missing something here?

    Cheers
    SG

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Yes you are missing something SG.

    The offset account is your savings account and has no bearing whatsover as far as the ATO are concerned.
    You an have all types of income and expenditure going into this account and it makes no difference.

    Their is no actual interest being paid to you so there is nothing to declare on your Tax return.
    You certainly wouldn't have 2 offset accounts one on your PPOR loan and 1 on your IP loan when you still have non dedcutible debt.

    Richard Taylor | Australia's leading private lender

    Profile photo of stargazerstargazer
    Participant
    @stargazer
    Join Date: 2002
    Post Count: 344

    QLDS007

    I would probably prefer to see the LOC funds drawn down into the offset account and the monthly interest come out from there.

    OK i am still not sure here i understand what you are saying but i getting lost with the above as you outlined previously.  This is how i am reading you:

    SAVINGS OFFSET ACCOUNT LINKED TO PERSONAL P& I …..is the main engine so to speak.WAGES RENT ALL BILLS PERSONAL AND INVESTMENT ARE PAID FROM HERE.

    THE PPOR NOW IP  LOAN and INVESTMENT LOANS ARE PAID FROM OFFSET.

    THE P& I PAYMENTS ALSO COME FROM OFFSET IF ANY

    THE LOC IS WHERE I AM STUCK IN THE ATO CONSDERATIONS..

    .IF I DRAW DOWN AS YOU SUGGEST THE INVESTMENT LOC AND PARK THE FUNDS IN THE OFFSET ACCOUNT THEN THE INTEREST ON THE LOC WOULD POSSIBLY NOT BE DEDUCTIBLE AS I HAVE USED THE FUNDS TO OFFSET PERSONAL DEBT THAT IS THE P& i LOAN.

    THE INTEREST THAT I AM CONCERNED ABOUT IS NOT THE ONE THAT IS BEING PAID TO ME AS THERE IS NONE IT IS THE INTEREST THAT IS INCURRED IN THE LOC DRAWING DOWN TO OFFSET PERSONAL DEBT.

    HOPE THAT MAKES SENSE.

    CHEERS
    SG

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

    I would be very wary of borrowing money and putting it into a savings account and then mixing it with other money.

    There was a legal case a few years ago where a person borrowed money, put the money in a savings account (maybe to access his cheques on that account). He then bought something investment related. it was deemed that the interest was not deductible because the direct link was gone.

    Forget the case now – does anyone know?

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

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of stargazerstargazer
    Participant
    @stargazer
    Join Date: 2002
    Post Count: 344

    Hi Terry

    I have heard of that case myself but the name escapes me.  This is my thoughts also in regards to drawing down LOC investment funds to park in savings account offsetting a Loan for personal use.

    This is how i read QLDs007 reply in the draw down that was explained into P&I loan.

    Cheers
    SG

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Guys

    Attended a Breakfast Seminar last week ran by Kendalls (4th largest Accounting firm in Qld) and the offset question was raised amongst other..

    Their attitude was as long as the funds were drawn down and intended for investment and could clearly be seen to be used for investment they could be parked with non investment funds short term and certainly would not be contaminated.

    I cannot remember the details of the case but the circumstances were different and hence the interest deduction was disallowed.

    Richard Taylor | Australia's leading private lender

    Profile photo of stargazerstargazer
    Participant
    @stargazer
    Join Date: 2002
    Post Count: 344

    Hi thanks for the comments,

    Their attitude was as long as the funds were drawn down and intended for investment and could clearly be seen to be used for investment they could be parked with non investment funds short term and certainly would not be contaminated.

    Don't know if i would be comfortable with this unless it was crystal clear. 

    If you did this and the ATO did an audit they would ask why you placed these funds in this account etc. 

    So you say just parked the funds from my INV LOC into OFFSET account  wating for an investment to come along.  I also am claiming the interest on the LOC that i have drawn down.   Meanwhile this has offset my personal use interest  I am not sure they would accept this explanation.

    Also what is SHORT TERM. 

    Cheers
    SG

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

    I wouldn't mix funds at all.

    See this newsletter article from Bantacs, under the sub heading "Losing interest deduction."
    http://www.bantacs.com.au/booklets/Claimable_Loans_Booklet.pdf

    "Imagine how you would feel if you borrowed $100,000 to invest in shares. Then when it came time to do
    your tax return your Accountant told you the interest is not tax deductible because the money went from
    your loan to your cheque account so you could write a cheque to your broker. A recent AAT case decided
    that if loan funds are intermingled with other funds before being used for income producing purposes they
    are no longer considered to have their source in the loan."

    And the Domjan's case

    Domjan and Commissioner of Taxation [2004] AATA 815 (5 August 2004)

    http://www.austlii.edu.au/au/cases/cth/aat/2004/815.html

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

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

Viewing 9 posts - 21 through 29 (of 29 total)

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