All rent going into one bank account?

But wasnt the question: Which IP to put your money towards? Or was I mistaken?

 

@Gockie .... my line of thinking is as follows:

All spare cash (wages, rents etc) first fill up PPOR offset. Then start filling up the offsets of the IPs, in order of highest interest rate to lowest interest rate.

 

Done.

 

@Gockie ... nice one. Which bank account rents first arrive in is irrelevant... there is no rule I am aware of that says you cannot then on-shuffle it to another account. Or indeed have all rents arrive in one account in the first place. Less online banking admin for you that way.

Did I manage to answer your question after all that?

 

I was trying to figure out what you meant by this... i'm still not clear...

 

Sure, put your rents into the one bank account, however wouldn't be it wise to keep a spreadsheet of expenses for each property and reconcile it every month with your bank statement. Otherwise I can see it becoming a nightmare for yourself and your accountant at the end of the financial year.

 

@Gockie ok my apologies. Let's say you have precisely two IPs. Let's say their addresses are as follows:

1 High St Melbourne; and
1 Main St Brisbane

And let's say you absolutely intend to sell one of them in a few years, and keep the other one forever. Let's say the one you intend to sell is the Brisbane property. Upon its sale, there will be CGT (capital gains tax) payable on the gain. The gain is calculated by the sale price minus cost of acquisition. Holding costs (such as mortgage interest) along the way also play a part.

Working out your capital gain | Australian Taxation Office

What is the cost base? | Australian Taxation Office

If holding costs (such as mortgage interest) are high, then this lowers the "gain" on paper, and thus lowers the CGT payable.

So if you intended to sell Brisbane anyway, one line of thinking might be to store the rents in the offsets against the Melbourne property loan, thereby making Brisbane look like a spectacular loss on paper because you paid so much mortgage interest. Meanwhile your Melbourne property has done really well because you stored money in its offset and thus paid less mortgage interest. However you are not intending to sell Melbourne so from a CGT perspective you don't mind that it has done well on paper.

On your tax return your annual tax is an aggregate. To a certain degree it doesn't matter how each individual property appears. What matters is how the total of everything looks on the annual tax return. It is when a property is sold and CGT is payable that individual property performance comes into play.

Does that make sense?

I am not an accountant so of course disclaimer disclaimer this is not advice, and the accountants on the forums may have a different view which is very welcome. Knowledge is power and sharing knowledge and ideas helps us all. Chat to your own accountant about your intentions and get the necessary advice.

 

Interest would be claimed against income usually and therefore wouldn't be taken into account when working out the cost base of a property.

 

Thanks JacM.

 

Why is it recommended to use a CC to pay for every day living and wipe it at the end of the month using your offset funds?

 

Because if you bought your product up front, the money comes out of your account, rather than sit there the whole month helping to fend off a bit of mortgage interest. This is why investors like to keep funds in the offset account during the interest-free credit card period. Obviously you pay it off in time so the big credit card interest does not kick in.

 

I see. Makes perfect sense.. Still so much I need to learn! Thanks!

 

@LCK - you're welcome! The key is never ever pay your credit card late. Never. It costs money in interest, and can result in a bad stamp on your credit file which can mess up your ability to secure mortgages later on. A bad credit file can also be problematic if you are trying to get a mobile phone contract, or buy a sofa on credit or interest-free terms, or if you want to buy a car on finance, etc.

 

I forgot to pay mine on time 2 months ago and I copped about $70 in fees and interest. I must set that direct debit up.