Changing insurance after already been paid for out of LOC

[Pablo]

Hi,

I am looking at changing my insurance's to another company, the problem is that one of them has had a years worth prepaid out of a LOC. This LOC is used solely for this properties expenses so that all the interest is tax deductible.

If I change the cover over I will be refunded a certain amount but this would technically make the money originally borrowed to pay the insurance no longer tax deductible and contaminate the LOC.

Should I :-

- Wait until the policy has ran out and then transfer this property over?

-Pay the refunded money back into the LOC? (but I think this will have to be paid off proportionally across the whole debt meaning there will still be non deductible debt in there)

- Transfer it any way, claim both and hope the tax department won't pick up on it?

- Transfer over the property but don't declare the new cover so that the tax department will not know that I was refunded money originally drawn from the LOC?

If I was to do one of the last 2 would the ATO be able to find out somehow?

Thanks
Pablo.

 

[jingo]

Hi,

I am looking at changing my insurance's to another company, the problem is that one of them has had a years worth prepaid out of a LOC. This LOC is used solely for this properties expenses so that all the interest is tax deductible.

If I change the cover over I will be refunded a certain amount but this would technically make the money originally borrowed to pay the insurance no longer tax deductible and contaminate the LOC.

Should I :-

-Pay the refunded money back into the LOC? (but I think this will have to be paid off proportionally across the whole debt meaning there will still be non deductible debt in there)

Thanks
Pablo.

I'd probably pay the refunded money back into the LOC. As your intention in using the LOC was to prepay an expense associated with bringing in an income, I'm not sure that paying back the funds would pose any problem at all? (But please check with your accountant, as I am not an accountant!)

I am in a slightly similar situation, having just received a refund from the council for rates that I prepaid on an IP. I prepaid 2009-2010 rates before 30 June 2009, and the council sent back a small refund as I have paid too much. I am just going to put that back into the LOC and adjust the amount I claim on my tax return. I will check with my accountant though to be on the safe side!

Regards Jason.