Is my DEPOSIT paid tax deductible

china said:
Why do you recommend LOC versus ordinary home loan? Lets assume the PPOR is fully paid off and I want to draw on equity to use as deposit on IP. I would have thought that an ordinary home loan would be cheaper as a source of funds for a deposit. And there is no risk of cross contamination or tax deductibility issues as the loan on the PPOR is purely for investment purposes.
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Because a payment can be made from a LOC directly. With standard IO variable loan products some allow you to pay directly from a loan amount but many (most maybe) don't. You will also have to draw down the loan fully at settlement. Lots of issues which could lead to the interest not being deductible.

Note that I only recommend a LOC for the release of equity, not for the main loan - not ever!

Once the LOC is used then the LOC could be converted to a IO loan.
 
darrelj said:
What would have I done at the start itself to avoid this?
Since the settlement happens Tuesday, have I yet got an opportunity to remedy or minimise
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You could have considered borrowing the deposit instead of using savings.

At this stage too late I think, I doubt the vendor would return your deposit.

Anyway it's not a huge deposit, just remember for next time. Keep your savings for when you run out of equity and cannot borrow the deposit. Even then, better to pay down the non deductible loan then borrow the deposit after all...
 
You may also need to invest some time in reading a couple of good books on property investing also Darrelj

There are a number of good suggested books in this forum
 
danwatto said:
You could have considered borrowing the deposit instead of using savings.

At this stage too late I think, I doubt the vendor would return your deposit.

Anyway it's not a huge deposit, just remember for next time. Keep your savings for when you run out of equity and cannot borrow the deposit. Even then, better to pay down the non deductible loan then borrow the deposit after all...[/QUOTE
]

Thanks for the encouraging words
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Hi

Sorry is the deposit tax deductible if you borrow from someone else like a family member? And you have an arrangement to pay them market interest for a number of year/s.

Will they have to declare the interest payment as part of their income?
 
lam said:
Hi

Sorry is the deposit tax deductible if you borrow from someone else like a family member? And you have an arrangement to pay them market interest for a number of year/s.

Will they have to declare the interest payment as part of their income?
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The deposit is never tax deductible.

The interest on a loan may be deductible if it is a commercial loan - commercial rates, terms, funds actually from the other person etc. See a private ruling where a husband borrowed from wife with the interest deductible. Authorisation Number: 1011723892356 - used it as a guide but don't rely on it.
 
Hi Terry

What is meant by "not mixing your moneys with private accounts"
I have one offset account and the separate loan accounts for my home and my IP . All my wages and IP rent comes to this Offset A/C. Then we use the same offset account for our daily spending and EFTPOS machines.
What is wrong here?
 
darrelj said:
Hi Terry

What is meant by "not mixing your moneys with private accounts"
I have one offset account and the separate loan accounts for my home and my IP . All my wages and IP rent comes to this Offset A/C. Then we use the same offset account for our daily spending and EFTPOS machines.
What is wrong here?
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I don't know what that means. Did I say it? If I did probably meant that you should not borrow money and park it in an offset account and mix it with non borrowed money.

Having all rents and wages deposited into the same savings account is ok as long as no money was borrowed and parked into the same account
 
Thanks terry. In fact it wasn't you who mentioned so. This is what I had read somewhere and thought I should ask you.
Thanks for clarifying.
 
Terry_w said:
The deposit is never tax deductible.

The interest on a loan may be deductible if it is a commercial loan - commercial rates, terms, funds actually from the other person etc. See a private ruling where a husband borrowed from wife with the interest deductible. Authorisation Number: 1011723892356 - used it as a guide but don't rely on it.
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Hi Terry thanks for your response.

Please ignore my ignorance.
May i know how i look up and read up on this private ruling?

thanks
 
I said it. What I mean was to not have a LOC for example and use some of it for investments and some for private (non deductible) things.

You need to keep things separate so as not to contaminate loans.
 
Today was the settlement date of my IP. But there was a delay on the vendors bank. So it has been delayed. As the "buyer" what should be my action.
 
darrelj said:
Today was the settlement date of my IP. But there was a delay on the vendors bank. So it has been delayed. As the "buyer" what should be my action.
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Send your mates round to his house with baseball bats and force him to settle :D

Our properties are like brothers, both settling on the same day, and both late. I don't think this one of mine will settle today.. but not much I can do about it. Solicitors, banks, and ATO all talking with each other
 
Your solicitor should have sent them a "notice to complete".
This gives them 2 weeks to complete before penalties.

Plus seek compensation to cover your extra costs.

Not sure if you can claim compensation before 2 weeks is up though.
 
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