Hopefully, a simple tax question.

G'day all,

I dabbled in some managed funds over the years, and since I have sold all of them I have a bank account with a negative balance left over.
I also have several investment properties, each with the own loan account, as well as a "buffer" account which I transfer money in/out of depending on what IPs need topups etc from time to time.

My question: is there any problem transferring some of the debt from the old managed funds account into some of the IP loan accounts (or the buffer account), since everything is tax deductible anyway?

All loans are in our individual names, no companies or trusts to complicate the issue.

My accountant suggested "no", as you shouldn't transfer debt from one investment vehicle to the other, but that was all they had to say and it leaves me to question why?
 
I'm not so sure that the old managed fund loan balance is still deductible as you no longer have the income producing asset it related to. Has your accountant said anything about that?

I can't see any problem with combining loans for different investment vehicles either but I'm worried that the first one isn't actually deductible anymore.
 
I'm not so sure that the old managed fund loan balance is still deductible as you no longer have the income producing asset it related to. Has your accountant said anything about that?

I can't see any problem with combining loans for different investment vehicles either but I'm worried that the first one isn't actually deductible anymore.

Howdy - yes they said it was still deductible, as a carried forward loss or some type of fancy wording - but only for a few more years. I'm actually not really worried whether its deductible or not as its not a large amount, I would just like to get rid of the "by itself" account, and merge it into several of my existing property accounts.
 
You would really be just refinancing the debt associated with the managed funds by borrowing off the property loans. Purpose wouldn't change if you do it properly, but since you are still deducting expenses with an investment that you no longer have you should be careful so as it maintain this deductibility.

Best to ask your accountant.
 
Do some research on tr2004-004. I found it and accountant confirmed ok in my situation, which appears similar in that I have loans still for funds that have sold at a loss. The tricky part appears to be related to re-financing. As previous post says be carefull with existing loans. And, document your intention with these loans, looks less like any scheme then.
 
Hi No problem claiming the interest on the old loan even though there is no underlying asset left as long as you used all available moneys from the asset sale to try and clear as much of the debt as possible first.

Technically there would be no problem in effectively re-financing the left over loan by adding it to an existing loan but you will need to keep a record going forward of the apportionment between the two.

We generally recommend keeping loans separate and identifiable to the asset that they relate to. This keeps things simple. For example if one asset is sold, the sale proceeds are required to be offset first against the related loan. If loans are inter-mixed, it becomes more difficult to establish the offset amount.

It is fairly easy to separate loans these days by simply creating sub-accounts within the one overall loan. This can be done after the event if needed.
 
Hi No problem claiming the interest on the old loan even though there is no underlying asset left as long as you used all available moneys from the asset sale to try and clear as much of the debt as possible first.

Technically there would be no problem in effectively re-financing the left over loan by adding it to an existing loan but you will need to keep a record going forward of the apportionment between the two.

We generally recommend keeping loans separate and identifiable to the asset that they relate to. This keeps things simple. For example if one asset is sold, the sale proceeds are required to be offset first against the related loan. If loans are inter-mixed, it becomes more difficult to establish the offset amount.

It is fairly easy to separate loans these days by simply creating sub-accounts within the one overall loan. This can be done after the event if needed.

G'day GaryT - thanks for your help, and yes you've put it in a way that elaborates what my accountant said, but you actually provided some reasons which is what I was after.

Cheers!
 
Depends how many times the loan has been refinanced, and the prevailing reasons each time.

A LOC is the worst possible scenario since it is refinanced every month according to the ATO (TR 2000/2).

Cheers,

Rob
 
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