i am in negotiation currently in buying my first investment property. My current offer is $350 000 for the unit. My PPOR i currently owe $27 000 with commbank 3 year econimiser loan. I took the loan out for $180 000 2 years ago and was given $120 000 from my parents. The value of my apartment is about $340-360k same unit block as investment property. My annual earning currently is about the $60-70k.
How can i structure my loans to minimise my tax payable each year. Also if i borrow more money to renovate but really pay my PPOR off is that possible some how?
Also what are the actual buying costs i predict $15 000, is that enough and im planning to spend under $5K to actually renovate aswell so i predict I will borrow a total of $370-380k depending on final price.
i plan to pay $700 a week in repayments give or take a little
If you need more info to help me please just ask.
Thank you
I live in sydney
Take a LOC out for 20% of the purchase price of the new IP plus costs secured against your PPOR. Then borrow the rest secured against your new IP. You will purchase the new property using none of your own money and minimise debt on non tax deductable loans.
But speak to a mortgage broker or accountant of course- I am no expert.
Luke.
Hi Stoj
Welcome to the forum.
Firstly, the primary aim of the game shouldn’t be to offset tax. The tax benefits associated with owning an investment property are nice – but should not be the main reason for investing.
In order to fund your purchase, you could do what Luke has mentioned. Top-up your loan with CBA – this will provide the 20% deposit plus purchasing costs. You would then organise a loan for the remaining 80%. This way, you’re keeping both properties seperate (ie. your PPOR is not securing your IP).
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
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If you only have $27k private debt left, then this is not too much to worry about. You should be able to knock it over in a year.
To speed things up you could look as using a LOC to borrow to pay expenses with the IP (in addition to that suggested above). Talk to your advisor about borrowing from the LOC to pay interest on your investment property too. This will free up cash so you can pay off your home loan in half the time.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Terry- Is is ok to use a LOC to pay for costs on an IP (such as rates, water, insurance etc)? And do you need a private ruling to be able to claim the interest that accrues on these costs or do you only run into problems if you are using a LOC to capitalise interest on an IP?
Cheers,
Lukeluke86 wrote:Terry- Is is ok to use a LOC to pay for costs on an IP (such as rates, water, insurance etc)? And do you need a private ruling to be able to claim the interest that accrues on these costs or do you only run into problems if you are using a LOC to capitalise interest on an IP?Cheers,
LukeYou can always borrow to pay expenses – but whether the ATO will allow it or not is another thing. If it is done with the dominant purpose of tax, then the risk is that they can apply part IVA and disallow it. A small risk maybe, but still a risk.
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
Seeing as there is plenty of equity in the PPOR could you borrow a further 20k on top of the required loan amount and fees and pay the interest on your IP loan upfront (which will be tax deductable?) and then use your wage and any income from your IP to pay your PPOR of quicker? Effectively just transferring your debt from non tax deductable to deductable.
Not 100% if this works but seems good in theory, maybe some more experienced investors may be able to expand on this
good luck
DaveGood idea Dave
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
navyboy wrote:Seeing as there is plenty of equity in the PPOR could you borrow a further 20k on top of the required loan amount and fees and pay the interest on your IP loan upfront (which will be tax deductable?) and then use your wage and any income from your IP to pay your PPOR of quicker? Effectively just transferring your debt from non tax deductable to deductable.Not 100% if this works but seems good in theory, maybe some more experienced investors may be able to expand on this
good luck
DaveYes this will work.
If you have an offset account for your PPOR it would beneficial as well- in case you need to access the funds.Stoj- 15k would only pay for the stamp duty and legal cost…you will need at least 5% deposit, unless you borrow this deposit via your PPOR top up. If you do top up the loan; make sure it’s a split loan to separate the IP and PPOR part.
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
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