Hi all, I have been a loyal reader since 2007. I have learned so much from this forum and eventually purchased my first home in 2009 due to the motivations from this forum. Thanks everyone.
My circumstances have changed and now I would like to convert my current property (1st home) to IP and rent elsewhere.
Mortgage details as following:
Apartment value: Purchased price $300K in 2009.
P&I Loan with re-draw facility: $235K, I have paid down to $175K. (Lesson learned for not setting up offset account)
I am a going to refinance with IO loan with offset account now. Can the expert from this forum please shed me some light on how to do this?
Do I refinance to $235K or $175K? My understanding is only the $175K interest is tax deductable, so I can only refinance to $175 to minimise complication with ATO (correct me if I am wrong).
I also thought of the following arrangement for capitalizing interest which I wonder if it is legal?
Acc #1: Every Day account- for PAYG Salary and incoming rent
Acc #2: Refinance current loan to IO with offset- $175K
Acc #3: Separate IO loan secure against IP with offset- $55K
Acc #4: Put $55K loan in dedicated account for IP related expenses such as interest, rates and etc (all expenses come straight off this $55K)
My question is, if I set the account in this form, is the $55K loan tax deductable?
Also, becasue I have set up offset for both loan, can I take out money from offset account without affecting tax deductibility of the borrowed amount?
Hope my post is not too confusing. Once again thank you.
My circumstances have changed and now I would like to convert my current property (1st home) to IP and rent elsewhere.
Mortgage details as following:
Apartment value: Purchased price $300K in 2009.
P&I Loan with re-draw facility: $235K, I have paid down to $175K. (Lesson learned for not setting up offset account)
I am a going to refinance with IO loan with offset account now. Can the expert from this forum please shed me some light on how to do this?
Do I refinance to $235K or $175K? My understanding is only the $175K interest is tax deductable, so I can only refinance to $175 to minimise complication with ATO (correct me if I am wrong).
I also thought of the following arrangement for capitalizing interest which I wonder if it is legal?
Acc #1: Every Day account- for PAYG Salary and incoming rent
Acc #2: Refinance current loan to IO with offset- $175K
Acc #3: Separate IO loan secure against IP with offset- $55K
Acc #4: Put $55K loan in dedicated account for IP related expenses such as interest, rates and etc (all expenses come straight off this $55K)
My question is, if I set the account in this form, is the $55K loan tax deductable?
Also, becasue I have set up offset for both loan, can I take out money from offset account without affecting tax deductibility of the borrowed amount?
Hope my post is not too confusing. Once again thank you.
