Untangling a deductible/nondeductible loan

[Luke]

Hi everyone...

This may be splitting hairs, but I can't find anything in the archives on this issue, and I just wanted to make sure...

Our IP has a loan that is a mix (about 2/3 & 1/3) of deductible debt and non-deductible debt. Currently it is P&I. Now that BofM/Westpac have nicely allowed me to have the professional package I want to untangle that mess, split part of the loan into a new account, and have the IP part of it on Interest Only.

Now is it splitting hairs to wonder what the tax office would want me to put where?
- Should the existing loan become the deductible portion only?
- Vice versa
- Or should I ask them for two new accounts, and close the existing one?

Thanks for your thoughts...
Luke

 

[DaleGG]

Hi

I don't think it will matter providing you can show a trail of what money relates to what. Keep it simple.

Have fun

Dale

 

[Rolf Latham]

Hi Luke

The product youre using provides for no cost split and set up, so Id suggest to split it nothing to lose.

ta

Rolf

 

[Lotana]

Capital repayment

Along the same lines, but a slightly different angle. Suppose I have a loan facility of $100K, drawn $40K to pay a deposit for IP1 and $60K to pay a deposit on IP2. After IP1 is sold, I make a principle repayment of $40K to the loan. Can I state that the payment applies to IP1 part of the loan and the remaining debt of %60K remains attributable to IP2 purchase? If the answer were yes, what documentation would I need to maintain to satisfy the ATO?

Thanks,

Lotana

 

[Luke]

Thanks Dale & Rolf!

You guys really are legends!
Luke