Hi,
SITUATION:
I am acquiring an Investment Property (settlement due in May2012). I have taken a Fixed Rate I/O loan (@ 95% LVR) that allows advance payment of annual interest. This does not allow any extra repayment of more than 10K/year. Meaning, I cannot put my rental income (26K/year) in this loan account.
I also have a a PPOR under which I have 2 split loans. The first is used purely for my personal income/expenses. The second split loan (with offset account) is used to make payment for deposit etc. for the Investment property. The interest on this borrowing is also tax deductible since the purpose of borrowing is to invest in Investment Property.
QUESTIONS:
1. I believe it is mandatory (from ATO perspective) for me to deposit my Rental incomes from the IP into my Split Loan 2 offset account (which does not mixes my personal income and expenses). Also, any expenses on IP such as rates, insurance fees, property management fees is paid out of this Split Loan 2 Offset account. Does that sound good?
2. I am expecting a Tax Return (because of advance payment of interest) of $17K. $15K out of this is expected to be due to the advance payment of interest on the IP.
In which account should I receive this $17K from ATO - Should it go to my PPOR Split Loan account 1 offset or PPOR Split Loan account 2 offset (which has no nexus with my personal funds).
Regards,
Sandy
SITUATION:
I am acquiring an Investment Property (settlement due in May2012). I have taken a Fixed Rate I/O loan (@ 95% LVR) that allows advance payment of annual interest. This does not allow any extra repayment of more than 10K/year. Meaning, I cannot put my rental income (26K/year) in this loan account.
I also have a a PPOR under which I have 2 split loans. The first is used purely for my personal income/expenses. The second split loan (with offset account) is used to make payment for deposit etc. for the Investment property. The interest on this borrowing is also tax deductible since the purpose of borrowing is to invest in Investment Property.
QUESTIONS:
1. I believe it is mandatory (from ATO perspective) for me to deposit my Rental incomes from the IP into my Split Loan 2 offset account (which does not mixes my personal income and expenses). Also, any expenses on IP such as rates, insurance fees, property management fees is paid out of this Split Loan 2 Offset account. Does that sound good?
2. I am expecting a Tax Return (because of advance payment of interest) of $17K. $15K out of this is expected to be due to the advance payment of interest on the IP.
In which account should I receive this $17K from ATO - Should it go to my PPOR Split Loan account 1 offset or PPOR Split Loan account 2 offset (which has no nexus with my personal funds).
Regards,
Sandy