Hi There,
I'm sure I remember reading something in API magazine regarding redrawing $$$ from your investment loan is a NO NO according to the ATO, as it will have implications for any negative gearing that you have been claiming and can void future Negative gearing claims at tax time??
Does this sound correct??
No. Not exactly.
You can always withdraw from a loan. But this is treated as new borrowings. So the interest on this new loan will only be deductible if you use the funds for investment or business purposes.
If you withdraw for private expenses you will create further problems as the loan will become mixed purpose and you will have to apportion the interest each year.
Best thing to do is to split the loan into 2 accounts that way you can clearly distinguish the 2
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 Terry
pardon my ignorance – when you say split the loan into 2 accounts?? is that like a variable portion and a fixed portion scenario – 1 account where a would claim Neg gearing and the other part of the loan where i would'nt – should i wish to redraw for personal exp…..
Would only redraw likely for other investment purposes. The bank was looking at me signing a 'redraw deletion' then they can look at my equity with more confidence…. etc
It need not be fixed each account could be variable or fixed, each could be IO or PI etc doesn't matter as long as the accounts are separate.
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
darkness72 wrote:Thanks Terrypardon my ignorance – when you say split the loan into 2 accounts??
He just means two loans.
Just apply the purpose test. If the money is being used for investment purposes than it's deductible. For private purposes – it's not deductible.
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]
thats why you set up a offset account isnt it ? so you dont effect the loan balance
wilko1 wrote:thats why you set up a offset account isnt it ? so you dont effect the loan balanceDifferent situation really.
Offset is for storing spare cash from savings an 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
I mean just if you had the option from the beginning.
why pay principal and interest and have to worry about your usage/risk of withdrawn money from the loan.
Just pay interest only with a offset account and pay principle payments into there.
wilko1 wrote:I mean just if you had the option from the beginning.why pay principal and interest and have to worry about your usage/risk of withdrawn money from the loan.
Just pay interest only with a offset account and pay principle payments into there.
Yep, that wil greatly assist as no extra payments will have been made with the cash available in the offset instead of in the loan as would happen wiht a PI loan
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 all your thoughts and advice
cheers
Darkness – research Line of Credit http://www.investopedia.com/terms/l/lineofcredit.asp
Some banks may call it a portfolio loan..
If you ask your bank about a line of credit they will advise you on how much you would be allowed to borrow up to.
may be refer to as an overdraft type loan .
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