Tax safe?
- Thread starter big_head
- Start date
The portion of interest must be deducted against the character of the income. For example lets assume your 2015 interest is 100% deductible for shares and rental. The rental interest deduction is claimed in a different part of the return. Sure you can apportion it today. But later it will be beyond complex.
It is NEVER wise to blend any loans. Each purpose should ideally be separate. That way when you sell shares and credit funds it wont taint the rental deductions. You cant sell the shares and not credit the loan if you used loan proceeds to buy them.
Ask your lender for a sub account to keep each use separate. Discuss with your broker.
It is NEVER wise to blend any loans. Each purpose should ideally be separate. That way when you sell shares and credit funds it wont taint the rental deductions. You cant sell the shares and not credit the loan if you used loan proceeds to buy them.
Ask your lender for a sub account to keep each use separate. Discuss with your broker.
firstly what do you mean by 'this account'?
Thanks for the replies. Hypothetical numbers.
PPOR loan originally 500k @ 90%
Repay 50k into offset and get house revalued now @600k.
Reduce balance of PPOR to 450k, and access available equity up to 90% (so total loan amount 540k).
2 loans now both secured by PPOR, one for 450k, the other for 90k (to be used for investment property).
If i was to spend 70k on a property, costs etc could the remaining 20k be used in another investment class, like shares? Or would this become an accounting nightmare?
I hope this makes more sense?!
PPOR loan originally 500k @ 90%
Repay 50k into offset and get house revalued now @600k.
Reduce balance of PPOR to 450k, and access available equity up to 90% (so total loan amount 540k).
2 loans now both secured by PPOR, one for 450k, the other for 90k (to be used for investment property).
If i was to spend 70k on a property, costs etc could the remaining 20k be used in another investment class, like shares? Or would this become an accounting nightmare?
I hope this makes more sense?!
The $70k is borrowing from the second split and then if another $20k from borrowed from the same split the following issues should be noted:
1. All loan used for investment so all interest should be deductible.
2. If paying IO it is easy to apportion the interest between the 2, if you get this wrong and the owners of the shares and the properties are the same it should matter either.
3. If you sell the shares or the IP then the original loan, ie $70k or $20k should be paid back
If you pay back the $20k, won't this need to be apportioned across each of the borrowings, effectively leaving you with a reduced deductible amount and a now non-deductible amount.
IMHO you would be better off getting 2 splits, one for the $70k and another for the $20k.
Well possibly, but it will be a 1 off transaction and there is an ATO ruling which says a split loan can be unsplit and separated on a reasonable basis which could apply.
Better to have separate splits if possible I think.
Not in relation to recouped expenditure repaid into the loan.
See the exception at paragraph 17 of TR 2000/2.
Besides, the first post already stated that the redraw was a separate account. It has been used 100% for income producing purposes.
It would be getting a bit anal to split that into two accounts, one for shares and one for IP, unless you were putting rent and dividends back into those accounts.
If it is to be a "transaction account" where withdrawals for IP are intermingled with rent and dividend deposits then that is a different issue.
