Hello, … I’ve just realized that I have a contaminated LOC loan on my PPOR… and I’m thinking about turning my PPOR into an IP. So how much is my eligible loan amount in calculating interest deduction?
Scenario,
1/1/08 LOC granted, with credit limit of $200K;
1/1/8-31/12/08 My parents loaned me total of $50K in to my LOC account (under the understanding that I have to repay when they need the money);
fortnightly Wage coming in, total amount of $100K
1/10/09 Taken out $20K to pay back my parents
1/1/8-1/4/10 I used LOC account to pay all my bills, including interest charged, total amount of $80K (they’re all used for private purpose)
1/04/10 Balance of LOC is $150K, and PPOR converted to IP.
I’m thinking of 2 answers,
a) $150K (LOC balance at the time PPOR turned into an IP)? or
b) $50K
(200K initial borrowing – 50K payment from parents – 100K wage deposit) (to my understanding of ATO’s ruling on deductibility on LOC loan, all payment considering as a payment to reduce principle, all amount taken out on private use is not eligible for interest deduction)
Next question,
If i hold/live in this PPOR for now,
1) take 30K out to repay my parents in full ASAP, so the LOC balance will increase to $180K,
2) then change LOC loan to an I/O loan (amount of $180K) with offset facility,
3) then a month or a few months later I turn the PPOR into IP.
Can I claim interest deduction based on a $180k loan now??
Thank you for any input!! Great place to learn!!
Scenario,
1/1/08 LOC granted, with credit limit of $200K;
1/1/8-31/12/08 My parents loaned me total of $50K in to my LOC account (under the understanding that I have to repay when they need the money);
fortnightly Wage coming in, total amount of $100K
1/10/09 Taken out $20K to pay back my parents
1/1/8-1/4/10 I used LOC account to pay all my bills, including interest charged, total amount of $80K (they’re all used for private purpose)
1/04/10 Balance of LOC is $150K, and PPOR converted to IP.
I’m thinking of 2 answers,
a) $150K (LOC balance at the time PPOR turned into an IP)? or
b) $50K
(200K initial borrowing – 50K payment from parents – 100K wage deposit) (to my understanding of ATO’s ruling on deductibility on LOC loan, all payment considering as a payment to reduce principle, all amount taken out on private use is not eligible for interest deduction)
Next question,
If i hold/live in this PPOR for now,
1) take 30K out to repay my parents in full ASAP, so the LOC balance will increase to $180K,
2) then change LOC loan to an I/O loan (amount of $180K) with offset facility,
3) then a month or a few months later I turn the PPOR into IP.
Can I claim interest deduction based on a $180k loan now??
Thank you for any input!! Great place to learn!!