A bit of advice

From: Anony Mouse


My son has two investment properties in Melbourne. He then moved to Canberra, and bought a property to live in. He then bought another property and rented out the first property, which was then 100% paid for. He used a line of credit on that property,to buy the next property which he is living in which is now nearly paid out.
He is now looking around for a new investment, which should not be a problem, as all criteria should be in place,
Question
How can he make claims for tax purposes interest etc on the first property.

"A government that robs Peter to pay Paul can always count on the support of Paul."
Of course, Paul's support is obvious, but it is equally obvious that to rob from Peter to pay Paul will make Peter
very, very angry.
My question is this: "How can you run a good government with a sore Peter?"
 
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Reply: 1
From: Les .



G'day Anony,

Sounds like the young bloke is doing very well - apart from assisting the Govt. far too much .... ;^)

To make his Melbourne rental (his old home) more Tax deductible, he simply needs to borrow against it to buy more rental property. Or he could sell it (the Capital Gains Tax paid would be diluted somewhat because it used to be his own home) and invest the proceeds in another investment property, or two.

All he needs is a bit more professional advice BEFORE making his moves - or, to butcher your Peter/Paul quote, "Peter just needs to learn THE RULES, and his name will immediately change to Paul"

Your son appears to have done very well while swimming against the current - imagine what he could do by using the current to assist him !!!

Tell him about this forum, Anony - we're all friends here with a common goal in mind - or buy him a couple of good books for Christmas ...

Regards,

Les


- "Eschew Obfuscation" - ;^)
 
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Reply: 1.1
From: Robert Forward


You are right there Les. He needs to actually spend some good money and see a Great accountant. Actually I know of a Great accountant in Canberra. His name is Tony Commisso. Here is his website.

http://www.acca.com.au/

Tell your son to mention I sent him.

And Tony if you read this post, you owe me one....

Cheers
Robert

The Sydney "Freestylers" Group Leader.

PS: "Be Not Afraid Of Growing Slowly, Be Afraid Of Only Standing Still."
 
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Reply: 1.1.1
From: Steve Navra


Hi Anon a Mouse,

If you wish, your son can contact me (I am Canberra based - in Manuka) and can come by my office for a cuppa and some advice.
No charge!

Always happy to assist forum members.

Regards,

Steve
 
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Reply: 2
From: Terry Avery


Your son claims the same sort of deductions for the first house as his IPs
in Melbourne, depreciation, agent's fees, rates and son on. If you are
asking can he claim the interest on the LOC then the answer is no. Why did
he take out a LOC on the first house, buy the second one and then live in
the second? Bloody stupid IMHO as you cannot claim the interest as a tax
deduction. You can take out a LOC on the house you live in and use the money
to buy another house as an IP, then the interest is fully deductible. If
your son's strategy has been to buy a house, live in it and pay it off while
he has other houses in the area that he was living in previously then he has
lost thousands of dollars in tax deductions which would have seen him
achieve a bigger property portfolio quicker. If he is in Canberra I suggest
he go along to meetings with other property investors such as the
Freestylers, they can set him straight.

Cheers

Terry
 
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Reply: 2.1
From: Anony Mouse


Thanks for the advice guys.
Basically he bought the second property as the first one (a one bedroom unit)was getting too small.
He was solemnly told by a mortgage manager, from BOM that the LOC was tax deductible, it was in effect just a refinance, what he did with the money didn't matter, ie he could have blown it at the Casino.
There is no paper trail to the second house he is now living in so why is the LOC on the one bedroom unit not tax deductible as it is now an investment property?
Alternativly what is the best way of converting a private residence, which is paid off into a tax effective vehicle?
He is now looking to move into a house with land.

"A government that robs Peter to pay Paul can always count on the support of Paul."
Of course, Paul's support is obvious, but it is equally obvious that to rob from Peter to pay Paul will make Peter
very, very angry.
My question is this: "How can you run a good government with a sore Peter?"
 
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WebBoard

Guest
Reply: 2.1.1
From: Terry Avery


As you have said previously he paid off the first unit. I assume that the
LOC was to buy the house he lives in now. Deductibility is determined by the
use of the funds not the security used to borrow. If the LOC was used to buy
shares or rental property then the interest is deductible. If the LOC is
used to buy the house he currently lives in then it is not deductible.

To sort things out, pay off the loan on own home using the rent from the
unit. When that loan is cleared then use the LOC to purchase more IPs.

Cheers
 
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