htopg – sounds like a great position to be in! Unless you HAVE to move out like I do you are living rent and mortgage free so cash flow should be good and a good amount of equity.
Interestingly, I spoke with another accountant last week who backed up what the other guy told me – that I don’t really need to worry especially about the older redraws because it is my PPOR and the tax office is unlikely to be concerned. He has told me to put the 55K so that it isn’t in question and I should be OK. Interesting…
jaiterry wrote:I spoke with another accountant last week who backed up what the other guy told me – that I don't really need to worry especially about the older redraws because it is my PPOR and the tax office is unlikely to be concerned. He has told me to put the 55K so that it isn't in question and I should be OK. Interesting…This is clearly wrong advice – legally anyway. Unless the $55k was borrowed and used for the property.
But if you are audited the ATO may not dig too deep or too far back so you may get around it.
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
I could easily demonstrate that I have invested in renovations for the property which was one of the points that the accountant made. Do you think that is a valid argument. I’ve spent far more on the property that what has been redrawn especially if I “return” the 55K.
As long as the borrowed money was used for an income producing asset then you should be fine – (assuming it was directly used).
The property wasn't income producing then but may be now so the interest would be deductiblle – probably
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
Hi htopg
With an unencumbered property there are always options however of course your local Bank manager may not be the right person to be advising you of what they as he probably hasn't even paid down his own PPOR loan let alone bought his 5th investment property.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi everyone,
Can someone please summarize the do’s and don’ts covered here for new people!? What should jaiterry have done to avoid all these problems, assuming in the beginning he was using ppor offset/redraw account to save deposit for investment property whilst paying a bit less interest at home, with the possibility of later renting out ppor?
How can you do that without reducing tax deductible interest later or is it ok as long as you don’t keep pulling it in and out in between?
For eg I buy a house and move in and start saving deposit for another inv property. I may rent ppor out later on too, where’s the best place to put savings in the meantime?
Not finding it confusing at all..!
Summary
1. Never deposit funds into a loan
2. Use IO loan with 100% offetTerryw | 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
Bingo! If only I’d cared to research it six years like Gazza!
Sorry Jaiterry not trying to rub it in!!
I had considered moving into a place and putting savings towards the next deposit in an offset or redraw account when we buy here (only just arived from UK) . I never would have realised the tax problems when we'd come to rent that out later or redraw the money towards a deposit.
So as long as it's an offset account not a redraw it's OK? Seems like a pretty easy mistake to make!
Seems like it's probably better to stay in cheap rented accomodation and just buy and rent out first+second properties here.
And when S McKnight mentions in his books about selling poorer performing properties and using the money to pay down other property loans and increase equity/cashflow in them you should never do anything like that if you are likely to refinance the property later on to reinvest funds in more property? Unless you have an offset account set-up on them too?
Thanks for the heads-up..
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