Loan restructure

[debmt]

Hi - I'm trying to work out the "acceptability" of the following senario. I'm not sure if I'm breaking any tax laws (ie avoiding interest)....

IP 1: Standand interest only loan (Bank 1)
IP 2: Standand interest only loan (Bank 1)
IP 3: Standand interest only loan with offset account (Bank 1)
All rental income goes into Bank 1 offset account. Have Bank 1 CC to pay all expenses. We have to "top up" Bank 1 from Bank 2 offset account.

IP 4: WAS our PPOR. This is a stand IO loan with Bank 2 - but holds an offset account that has our "personal savings" in it. Rent from this currently goes to Bank 1 offset. Repayments currently come from Bank 2 offset. Other expenses from Bank 1 CC.

PPOR - Loan is NOT with a bank (hence the Offset on IP 4 still holding the majority of our "personal money"). Repayments will be made from Bank 2 offset.

I track all money (income, expenses both property and personal) through Quicken and use this at Tax time.

Questions:
1. Can be get rid of Bank 1 offset and run ALL income and expenses straight out of Bank 2 offset? I can't see a problem from a tax POV as it is an offset account (and not a LOC)? I'm trying to simplify everything.

2. Would this be the same with the CC expenses? Could I just use our personal one?

3. While we lived in our PPOR, we did "refinance" to have a larger amount of money in our offset. I suspect this additional amount can't be moved to our new PPOR in the future (ie if we change that loan to a bank whereby it has the ability to have an offset). I envision the "not drawn up amount" is still ours to move though?

Would appreciate any other thoughts or wisdom as it is all very confusing at the moment!

 

[Terry_w]

1. offset account is savings. no tax effects
2. cc is a loan. if you pay it off each month there is no interest. if you are buying investment items and non investment items with it and not paying it off or are refinancing it by paying it with borrowed funds there could be issues then
3. Redrawing extra money is new borrowings. What the funds were used for will determine deductibilty. If you have parked funds in offset account then no deductibiliy of interest on this loan.

 

[debmt]

Thanks Terry. We do pay cc off fully each month so that shouldn't be an issue.

We have always kept everything (ppor vs ip) separate though the new purchase with the loan constraints mean it's now about blended.

I thought that about the borrowings (in sure you get sick of repeating yourself)!

One more question - who is best to advise us on these type of issues ongoing? Our accountant is only a 'tax accountant' so they said they can't really do so.

Is it a financial planner? Does someone recommend anyone on north side Brisbane (happy to move accountants).

 

[Terry_w]

One more question - who is best to advise us on these type of issues ongoing? Our accountant is only a 'tax accountant' so they said they can't really do so.

Only lawyers and registered tax agents can advice on tax law. Most accounts should be able to help.

 

[jelsa2]

Moving PPOR to IP2- best way to set loans

Hi all

Currently have 10 yr PPOR 110k owing, com bank split loan Variable.
1 x 1P loan split 100k com bank variable, 250k Adelaide Bank. Comm loan coming of special rate 3yrs 5.13%. All in my name.
Will be moving with my partner of 8 yrs to his new PPOR.

Appreciate thoughts on new setup to take advantage of rates & tax advantages if any.
Have broker checking with my accountant but would like second opinion to compare.
Thanks in advance
Jelsa2