Hi everyone,
I have a question about where to sit the profit from an IP sale?
Our situation:
* Currently in the settlement period for the sale of IP#1 – profit after paying out loan and extras will be about $145k.
* IP#2 has a loan against it of $172k, IO repayments with an offset facility.
* Reason for selling IP#1 is to fund out PPOR, however we haven't has yet set up this loan/ purchased. So our total debt after the sale of IP#1 is only IP#2 of $172k.
* Our offset a/c (savings, cashflow) balance sits at $25k currently.Question:
What is the smartest 'home' for our profit from IP#1? If we had a PPOR then I would obviously put the money directly into this. I hesitate to direct the profit into our offset, reducing our ability to claim maximum monthly repayment amounts for IP#2. So then do we simply place the profit into a high-earning savings a/c until we purchase our PPOR?Thanks in advance.
Amy
Why not put it in the offset on IP2?
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 Terry,
So my understanding if i put the profit in the offset would be that we would only pay interest on the difference ($172k-$145k=$27k). This is obviously alot less than the current monthly IO payment on $172k. Is this the best decision tax-wise when it comes to claiming the interest?
Thanks!
Actually i forgot to add the current balance of the offset to the profit. The offset balance would be approx $170k against the debt of $172k, meaning interest is only charged on $2k (??)
Hi there
I’m with Terry, I’d be inclined to place it in the offset.
Crunch the numbers on two scenarios. The first being placing the money in the offset – the second being the money a high interest rate savings account. Remember you’ll be taxed on interest made in the savings account.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
You would get getting a 6.5% approx return if you use the offset
v
4.5% approx in a savings account.Are both names on title for the IP? Does one spouse have very low income?
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 Terry and Jamie,
Thanks for your thoughts. Yes, both names on the title and I am currently one week off having our third child so, not working and haven't this FY.
So I'm thinking the offset option is going to make the most financial sense. It will mean IP#2 goes from neg to pos geared but that's not too bad given the profit will be split.
Thoughts?
What will your income be like when you are not working?
If might be better to open a savings account in your own name and earn some tax free interest and let your husband save more tax on the negative gearing – but this will depend on the savings rate.
I seen one on TV tonite which was around 6.01% at call for the first 4 months with Rabo bank.
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
My income is zero so worth considering if the rate is right.
Thanks for your help.
gettign interest from a savings account could be a worthwhile place to put your money. i've got mine at ubank
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