Hi i have bought a house that i have just moved out of and now renting for $500 a week.
I bought it for 429,000 2 years ago and it is on principal and interest and i just recently added an offset account to itJust wandering if i should change it to interest only?
I also just recently bought a duplex that is interest only but no offset account linked to it and is getting rented as wellThere are a million threads on this topic on this forum. The consenus- change to interest only ASAP!!!!
Search "Interest Only" on the forums for other threads.
Luke
If you keep paying PI you are locking your cash away in an investment property. This not only decreases deductions but prevents you from accessing that cash for private usage without adverse tax consequences.
eg imagine you had paid down the loan by $100,000 and then you decide to buy a new PPOR. You cash is locked away. You may take it out via redraw, but you would have to pay about $7000 in interest for this money and not be able to deduct it.
Now say you had $100,000 in the offset. This would result in the same interest, but when you want to buy your new PPOR you remvoe the money from the offset account and use it. You then will pay an extra $7,000 pa interest on your investment loan, but you will be able to claim the interest on this.
This strategy may save you $3,000 pa. over 25 years this adds up!
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 does ' paid down the loan' mean the same as 'amount paid in advance'? So if I have paid in advance on a IP and decide to buy a PPOR and use the paid in advance money towards the purchase of the PPOR I cannot claim the interest even though the loan is tied to the IP?
G'day Judd.
Yeah Interest only and offset accounts rule for IP. Terryw has given you sound advice so get rid of your existing P & I loan on the IP and make better use of your money!
CHEERS!
TCbeanz wrote:Terry does ' paid down the loan' mean the same as 'amount paid in advance'? So if I have paid in advance on a IP and decide to buy a PPOR and use the paid in advance money towards the purchase of the PPOR I cannot claim the interest even though the loan is tied to the IP?Any deposit into a loan is a payment and any wthdrawal is new borrowings.
If you pay money in advance into a loan and then later take it out to buy a new main residence the interest on this 'new borrowings' will not be deductible.
have a look at this weeks newsletter at http://www.bantacs.com.au (no 222 from memory) as there is a really good article on this sort of thing
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
Thanks for that Terry, very informative.
Terryw wrote:Any deposit into a loan is a payment and any wthdrawal is new borrowings.If you pay money in advance into a loan and then later take it out to buy a new main residence the interest on this 'new borrowings' will not be deductible.
have a look at this weeks newsletter at http://www.bantacs.com.au (no 222 from memory) as there is a really good article on this sort of thing
Wow, this is helpful for me too. Does this mean that (interest paid on) re-drawn money used to pay for shares (to reduce a margin loan) is not tax deductable if it went through a Streamline (transaction) account on the way?
Cheers.
wafti123 wrote:Terryw wrote:Any deposit into a loan is a payment and any wthdrawal is new borrowings.If you pay money in advance into a loan and then later take it out to buy a new main residence the interest on this 'new borrowings' will not be deductible.
have a look at this weeks newsletter at http://www.bantacs.com.au (no 222 from memory) as there is a really good article on this sort of thing
Wow, this is helpful for me too. Does this mean that (interest paid on) re-drawn money used to pay for shares (to reduce a margin loan) is not tax deductable if it went through a Streamline (transaction) account on the way? Cheers.
yes, that would possibly not be deductible as the money was no longer borrowed when you took it from the savings account – it was savings. This is especially so if there was other money in the account too – Domjan Case.
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
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