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Another obscure finance q

Discussion in 'Property Finance' started by Glorion, 31st Aug, 2015.

  1. Glorion

    Glorion Well-Known Member

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    Hi guys, I have another question pertaining to finance. I'm going to have my loan set up so that it is 100% offset (for a ppor). My parents own an IP, and have their ppor fully paid off. Is there any reason not to take the funds out of their IP offset and use them for my own offset? Paying my parents the interest as if they were the bank. This would allow them to be more negatively geared, whilst also providing a tax free income stream from myself. Is this right or do I have this skewed?
     
  2. pinkboy

    pinkboy Well-Known Member Premium Member

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    It was all good until you got to the part 'tax free income....'

    Your parents will have to declare this income (the interest earned) on their tax return if it is a commercial loan from them to you.

    pinkboy
     
  3. Glorion

    Glorion Well-Known Member

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    Perfect! Thank you. I assumed as much, curious as to know how the ATO will work out that I'm not wiring money to my wonderful parents based on the fact that they raised me and I feel I owe them!
     
  4. Harry Nguyen

    Harry Nguyen Member

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    Your parent raised u?
    Not sure if our gov agree to that ;)
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Think what are the implications if either of you
    1. die
    2. divorce
    3. lose capacity
    4. become bankrupt.

    A commercial loan agreement should be considered - interest could be at 0% though but it should be a legally enforceable agreement.
     
  6. tobe

    tobe Well-Known Member

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    Check with your accountant, but I reckon their loan to you isn't tax deductible for them. Its only tax deductible if the purpose of the loan is to produce an assessable income.
     
  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Nope, it would be deductible in this case as they are proposing to take cash form the offset - deductible assuming the funds in the offset are not borrowed.
     
  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    It would be tax free income stream to Glorion in the form of reduced interest. Parents would have to pay tax on any interest received, but there doesn't have to be interest paid, that is up to the parties.
     
  9. Glorion

    Glorion Well-Known Member

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    Cheers Terry, as always, your advice is both sound and prudent.
     
  10. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Thanks - got a legal tip coming up on this topic soon too.
     
  11. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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