Can I use Rent from an IP to paydown PPOR Home Loan?
Currently have IP Rent coming in. This is going into an IP LOC.
Can I use this instead to paydown my PPOR Loan and let the IP LOC incerease?
Is this allowable with regards to TAX?
Will the interest on the IP LOC be tax deductible even with it increasing?
Yeah shouldn't be a problem – I would have thought there would be less taxation implications with that approach rather than paying the rent into an IP LOC.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
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Jamie M wrote:I would have thought there would be less taxation implications with that approach rather than paying the rent into an IP LOC.Cheers
Jamie
Why? Rent goes in, bills, interest comes out. I would have thought that was pretty standard. I have a LOC that I use in that way. It stays at pretty much zero all the time. Makes it easier on the accountant if all money goes in and out of one account.
If you mean can you allow the IP debt to capitalise and then claim interest on the increased debt them regretfully no
Nothing to stop you having the rent paid into a 100% offset account linked to the PPOR debiting the IP interest payment once a month.
Then setting up a separate Invt LOC and using this to pay the Council Rates, insurance, etc.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Catalyst wrote:Jamie M wrote:I would have thought there would be less taxation implications with that approach rather than paying the rent into an IP LOC.Cheers
Jamie
Why? Rent goes in, bills, interest comes out. I would have thought that was pretty standard. I have a LOC that I use in that way. It stays at pretty much zero all the time. Makes it easier on the accountant if all money goes in and out of one account.
my preference would be for the funds to into an offset against a PPOR – each to their own.
It shouldn't make a difference to the accountant in terms of the work they do – they can look at the end of year loan statement and PM statement to work out income/expenses.
It's important that any money paid into the LoC isn't redrawn for non IP purposes too – you don't have this issue with it going into an offset.
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]
OK that makes sense. We don't have a PPOR loan.
) When we were negative I used to top up the LOC but now it takes care of itself. LOC is only for investments so no issues there.
Cheers
Chris-Syd wrote:Can I use Rent from an IP to paydown PPOR Home Loan?Currently have IP Rent coming in. This is going into an IP LOC.
Can I use this instead to paydown my PPOR Loan and let the IP LOC incerease?
Is this allowable with regards to TAX?
Will the interest on the IP LOC be tax deductible even with it increasing?
This is a dangerous set up.
There is nothing wrong with using income to pay down the non deductible loan first. I wouldn't go as far as Richard to say you cannot capitalise interest – this is possible in some circumstances – one of the judgments in Hart says so, specific tax advice is needed.
But, paying rent into a home loan or offset on the homeloan while paying the monthly interest on the IP should not bring up ay problems.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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