Thoughts?
Part IVA of the ITAA 1936
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Thoughts?
Thoughts?
Is no one other than Rixter employing this technique of using the LOC to pay IP mortgage interest? I am interested to see if this technique is more wide spread?
So if we use a LOC for expenses (and deposits) on multiple properties then do we need to
1. keep record of which IP caused these expenses?
2. proportionate mortgage interest for each property?
3. pay back all costs when we sell a property?
3. Repay the loan relating to the sold property, not the costs.
2. yes
Not critical if you dont. There is provisions under a section in one's 'personal' return that allows other Investment related expenses to be included.. My understanding is Investment LOC interest can be included under this. By doing so it is not apportioned to any one individual IP but rather investment portfolio overall deductions.
Say I take out 400K.
Used 100K on deposit.
Used another 25K on costs like council rates & insurances.
Do I need to pay back 100K or 125K?
I pay all our property portfolio expenses ( loan interest & all holding costs) via investment LOC's. I dont do it to pay down my PPOR though as there was a ATO case that ruled against it a few years back. All our after tax income goes direct into PPOR & all our investment income goes into our investment LOC's.
Hi Rixter,
Could you do this using equity in a crossed investment loan using equity within that loan? That is, capitalise the interest.
Thanks
LE
My understanding is, it's not what asset/s (ie ppor or IP's) that is used to secured the loan, rather what the equity drawn from the loan is used for (ie investment/business or personal) that determines tax deductibility or not.
You also must keep all investment/business drawings in a separate loan/s to personal drawings. In other words, you must not contaminate a loan with investment & personal drawings together.
Thanks Rixter,
Basically, I just want to capitalise the investment loan and put any extra funds into the offset which I have attached to it. This will increase the investment loan (and the offset with the extra funds). I am hoping to place funds into the offset when I sell a couple of unencumbered properties in a few years. They will be CGT free as I am an ex-Navra client with capital losses...
The purpose of all this is to increase the available credit limit on the investment loan. After selling the unencumbered properties and placing the funds in the offset the investment loan will be increased. The non tax deductibility of the capitalised investment loan might put a halt to all of this.
I appreciate your thoughts....
LE