Shares purchases with LOC

[Tom Alaka]

Hi guys
Another newbie question following along similar lines to the one posted by Misvee just recently.

I have an LOC which I is for everyday use. All my pay goes in, it then it is used to pay bills, mortgage repayments etc etc.

First query - I have just applied for an IPO, and transferred monies from my LOC to a dormant savings account (i know I know but I needed an account with chequing facilities, my LOC bank is interstate and slowwww). These monies will be in the savings account for only 1 day prior cheque being cut.

Im attempting to get a handle on the Domjan case, but i thought that at first instance, the deductability nexus would not be lost because of the short timeframe and the savings account being dormant. Is this correct??

Second query - if I can claim, then I have to work out deductability, and the LOC has about 30 transactions going in and out per month. Ive done a search on this forum and web but cant find any excel template helpful.

Can anyone point me in the right direction here? Im useless with excel so ive given up on trying to come up with one myself.

Any help would be greatly appreciated

 

[Corsa]

First query - I have just applied for an IPO, and transferred monies from my LOC to a dormant savings account (i know I know but I needed an account with chequing facilities, my LOC bank is interstate and slowwww). These monies will be in the savings account for only 1 day prior cheque being cut.

Im attempting to get a handle on the Domjan case, but i thought that at first instance, the deductability nexus would not be lost because of the short timeframe and the savings account being dormant. Is this correct??

In this instance I would have thought that you would still be able to deduct the amount associated with the IPO application, the fact that it has gone through 3 accounts (LOC then Savings then IPO ) does not preclude the fact that those funds were destined for the IPO and to be used for income earning purposes. The main prerequisite here is that the expenditure must be incidental and relevant to the gaining or production of assessable income. If you cannot readily distinguish from your LOC what is essentially in character private and personal, between that of investment related, you may have troubles establishing this connection, but in the case you are describing you should be fine. The only catch is that until the IPO is finalised, they are not technically income producing and therefore you may not be able to deduct any interest until the time that they become income producing.

Second query - if I can claim, then I have to work out deductability, and the LOC has about 30 transactions going in and out per month. Ive done a search on this forum and web but cant find any excel template helpful.

For each day that your IPO investment (from the time that it becomes income producing) you are able to calculate the interest deduduction. If you have many ingoing and outgoings from your LOC then you need to separately calculate what component of your LOC is deductible due to investment and what is not deductible based on personal expenditure. It is not impossible to calculate but you will need to do an excel model to calculate the appropriate interest dedeductions.

The main aspect to consider here is that you cannot apply all ingoings going into that account just against personal expenditure, you must apportion the income in accordance with paying off the oldest expenditure first, so if your LOC is fundamentally secured by an income producing asset, then this will result in your investment debt being paid off first, then depending on the sequence your private debt and IPO debt in that order. If you cant readily calculate this using your own skills in excel, I suggest you get your accountant to set up an easy template for you to monitor this, and or you get separate investment and personal accounts to minimise any confusion.

Hope this is of some help and let us know how you get on

Best Wishes

Corsa

 

[Tom Alaka]

Thanks for that Corsa, your comments are, as always, much appreciated. I have a few accoutant type friends and might put this question to them as well.

Re the LOC calculations, unfortunately I dont currently have a 'paid' accountant and I find myself juggling all the paperwork for multiple properties ( i will be addressing this issue for the next financial year).

So anyone out there who can pls assist me with an excel spreadsheet which can make these LOC interest calculations?? Ive purchased POSH, Quickbooks and other commercial software over the years and none do this job.....

 

[Corsa]

Dear Tom

I have built an interest calculation model for you to help you try and work this calculation out.

Basically just extract all your transactions from your bank or accounting package (assuming you can get the file format into a csv format with the following headings (Date, Transaction Amount, Transaction Description) then you should be able to copy these into this spreadsheet under the "Transactions" sheet, add a few variables under the "Interest Rates" sheet, and then assign each transaction into a "Personal" or "Investment" category, then this might help you work out what the interest calculation is for each day of the financial year that you are considering for both personal and investment. There are instructions in the first sheet to help you out and remember when ever you make a change to transactions or interest rate just select the "update" button on the Interest Rate Sheet so that everything is updated for the calculation.

See how you go anyway,

The file is too big, and Sim has advised we cant increase the attachment size, so I will have to email it to you. If anyone else wants a copy then email me separately on [email protected]

Best Wishes

Corsa