Amp master limit, Loan splitting

Discussion in 'Loans & Mortgage Brokers' started by Selected, 15th Jun, 2021.

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  1. Selected

    Selected Member

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    14th Jun, 2021
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    South Australia
    Hi All,
    After reading the goldmine of information on this site regarding debt recycling, I am slowly getting my head around things.

    This is something I am looking to implement in the near future.

    Assuming I have the AMP master limit facility.

    Split into 3 loans
    Loan A 500k Main PI with offset
    Loan B 10k LOC (mandatory?)
    Loan C 50k IO, deductible, invested in Etfs buy and hold

    I have read it is possible to increase deductible debt by 2 ways, (eg. 10k accumulated in offset)
    - By creating a new split from Loan A and paying it Down with a chunk of cash from the offset and purchasing Etfs with the new split.
    Loan A 490k PI w offset
    Loan B 10k LOC
    Loan C 50k IO invested in Etfs
    Loan D 10k IO new split to purchase etfs

    - Or it can also be done by decreasing limit on Loan A to 490k and Increasing limit on Loan C to 60k, then paying loan C down with 10k from the offset and purchasing the same allocation Etfs.

    The plan would be to invest in chunks of ~10k into long term hold Etfs.

    Questions:
    - what are the benefits of each option? I like the simplicity of keeping only 3 loans, is there a reason I should steer clear of this option?

    - can funds from an IO master limit split be sent via bank transfer to a broker account?
    What is the usual flow of funds to minimise contamination, would I be best to create a new online broker account eg comsec, and create a linked commonwealth account specifically to hold the funds from the loan pre Purchase? Or do people link their online brokerage accounts directly to the IO split?


    Thanks for your help, I am in the process of engaging a mortgage broker about this and also have a meeting scheduled with my accountant, I'm just looking for some preliminary info to go in prepared.
     
    Marku likes this.
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Consider the tax risks with increasing a loan. I would set up a new split then pay it down and invest directly from the loan account.
    After you get too many splits you could consider joining them up, again considering the tax issues
     
  3. Selected

    Selected Member

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    Thanks Terry, and that answers another question on whether consolidation of splits was possible. Cheers
     
  4. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Im not a tax guy, but have had no issues with borrowers tax practioners signing off on on dozens of facilities with the 3 loan split approach in recent times.

    The accountant assumes, as do I that, the client will run the facility as instructed.

    As at this date, with hundreds of clients running such facilities with AMP, Mac, STG, WBC, no one has yet stuffed it up.

    Conversely I have seen borrowers get into a mess with too many loan splits, and actually toss the baby out with the bath water and give up on the strategy.



    ta
    rolf
     
  5. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

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    Likewise - having too many splits can be a complete nightmare. As long as you and your accountant agree on how the record keeping will be done, there should not be a problem with reducing the amount of splits.
     
  6. Selected

    Selected Member

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    Thanks, It's good to get some other point of view.

    Will be discussing with my accountant, so they are happy with the record keeping.
     
  7. Marku

    Marku Member

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    Great thread @Selected
    I am between the same two options and can't decide. Which way did you go, what did your accountant recommend?
    Thanks