Seeking your valuable thoughts on my plan

[tester]

I have spent last few days in here to come up with right solution for IP finance strategy. Please advise if you think i am missing anything or misunderstood anything or whether this will work Aus Tax law.


Current Situation:

PPOR - Equity 300 K. I have I/O only loan with Offset acc 260 K saving.

Plan for 1st IP:
1 Loan IO loan on 80% against IP 1.
1 LOC against PPOR to cover 20 % IP 1 and associated buying Cost.
2nd LOC against PPOR to cover IP 1 on going cost like maintenance and interest payment to 80% IP LOC, etc.

Rent/income from IP 1 will get deposited to PPOR offset acc. Offset will service IO PPOR loan and 2nd LOC against PPOR IO loan payment.




Plan for 2nd IP:
1 Loan IO loan on 80% against IP 2.
1 LOC against PPOR to cover 20 % IP 2 and associated buying Cost.
2nd LOC against PPOR to cover IP 2 on going cost like maintenance and interest payment to 80% IP LOC, etc.

Rent/income from IP 2 will get deposited to PPOR offset acc. Offset will service IO PPOR loan and 2nd LOC against PPOR IO loan payment.

 

[Rolf Latham]

If TW provided that advice on your full disclosure, then its obviously pretty robust

ta

rolf

 

[Terry_w]

2nd LOC against PPOR to cover IP 1 on going cost like maintenance and interest payment to 80% IP LOC, etc.

I don't think I have ever advised you tester. I wouldn't advise on borrowing to pay interest usually.

 

[ripas]

Seems to be a common query. Is there a diagram to represent how the loans works against PPOR and IP's - there is a diagram in Margaret Lomas' book but not sure it current.

 

[tester]

I came up with above based on this


"
Get a LOC secured against the PPOR.

Keep existing loan as is - with offset.

Borrow 20% plus costs from this and the remainder 80% secured against the investment property, interest only.

Only use the PPOR as security for the LOC

Only use the IP as security for the 80% loan

= 104% loan with no cross securities.

Al wages and rents goes into the offset on the PPOR saving you non deductible interest.

Use an interest free credit card with points to keep your cash in the offset longer saving you more interest.

Consider a separate PPOR LOC to use to borrow to pay investment property expenses (seek tax advice first).

Pay only the interest on each LOC (using the offset funds)."

 

[Terry_w]

That is hardly advice - just a forum post. And you haven't followed what I have written.

 

[tester]

Sorry if misunderstood. Please reply with your comments as to where i have gone wrong ?

 

[j_p]

Think it is the last part of your original post tester.

"... 2nd LOC against PPOR IO loan payment."

Paying interest with a LOC. Terry already addressed this.

"I wouldn't advise on borrowing to pay interest usually."

My understanding is that costs of maintaining an IP are tax deductible but not the interest. So you can pay for say a new hot water service using your LOC and maintain its tax deductibility. Not interest payments as this is not tax deductible.

But seek your own professional advice

 

[peaches]

Get a Private Ruling from the ATO and then you can rest easier.

 

[tester]

Get a Private Ruling from the ATO and then you can rest easier.

How do i get private rulling ? do i need professional accountant to do that ?

 

[Corey Batt]

How do i get private rulling ? do i need professional accountant to do that ?

https://www.ato.gov.au/general/ato-...rivate-rulings/applying-for-a-private-ruling/