Buy shares using offset account

Depending upon whether the profits are treated as income or capital gains based on your trading record - so seek your specialist tax accountant's opinion on this matter.

Have you had a beer with @fullylucky? He might gibe you some tips.

 

Thanks again Bran. I'm currently reading the other ASX thread and also resources about index and managed funds.
My understanding is that index fund usually has lower maintenance (admin) fees compare to managed fund? For VAS, do people invest for income or growth? Using a simplistic view, I looked at the 1,3,5-year performance of VAS, there is no growth in the price?
Got this from CommSec chart, Last closing price on 26 Feb 2016 is $62.17.
5 Year -> 1 Mar 2011 $62.49,
3 Year-> 28 Feb 2013 $65.30,
1 Year -> 2 Mar 2015 $75.25

Well, it's a different topic and I will put my questions on the other thread re: index & managed funds.

Thanks Daniel. I'm exploring the 3 possible options you mentioned above to see which one suits me best. And I will have a chat with my accountant on the plan. Great advice overall!

I think we should create a share meetup Not sure if moderator is ok with this since it's a property forum.

 

No idea - I'm after both, but it's the dividends that will help pay down my debt. But I had no deductible offset so thought I should do something with some money. It's a play amount, and using it to actively learn and spark some interest. I don't learn much by reading unless I have some skin in it. But unlike my first property disaster, I'm keeping the stakes low. I'm enlisting help for the higher amount stuff, even if it might be cheaper doing it myself - I see it as a shortcut

 

It seems to me you want to gamble(trade) and invest(buy and hold) with money from your PPOR. In addition to risking money from your home in contradictory investment philosophies, there seems to be no notion of risk management as you seem to be already counting the gains and not losses. Also not taking into account brokerage, capital gains and or taxation status i.e trader or investor.

As inferred above, maybe be easier/simpler to get a LOC from your mortgage at ~4.5% invest in VAS (5.19% p.a) , VAP (12.84% p.a) VGS (8.56%) and DJRE (17.06 p.a)
(5 year returns according to sharesight)

Or alternately considering commercial real estate is quite high, invest a small portion in VGE or QRE as they are in bear markets.

 

Good on you mate. At least you've started. For me, I would like to learn as much as I can before jumping the gun. It's to know the risk tolerance that I would be taking.

 

Thanks Radson, I was inspired by a lot of your posts in regards to other asset class (shares, ETF, etc). I certainly do not only count on the gains. I plan for the worst and hope for best.
For the worst case scenario, I think I know how to manage hence there is NO question here.
For the better/best case scenario, I think I need to know more e.g. very basic like account management hence my OP.

Thanks for these suggestions. I'm still researching at this moment, but definitely would like at them at some point. Anyway for the specific shares (including funds etc), I would post them in a separate thread. This thread is mainly to understand the account management side of things.

Thanks Y-man, I'm still learning. But this is a good feedback so I won't do the same mistake in future posts

 

Hello,
First time poster. I've open an investment loan using PPOR as security. I want to use the loan to buy shares over time. The money was placed into my savings account by the bank and I am about to start paying principal/interest payments on the loan. For the meantime, to reduce interest, I have created an 100% offset account against the loan and placed the money in there. I will draw down on the offset account over time to purchase new shares. I just wanted to confirm in this scenario that the interest on the loan is tax deductible ? Many thanks for the advice anyone.

 

no

 

hmm ok am sorry but are you able to explain why that is? Is there a way I can structure this to become tax deductible since the loan is totally separate and is being used to purchase income producing assets?

 

I think i have covered this here
Tax Tip 9: Don’t use Cash in Offset account to Invest Tax Tip 9: Don’t use Cash in Offset account to Invest

 

Hello Terry, I really appreciate your response. I did read that Tax Tip, and scenario 2 seems exactly like how my loan is structured - or perhaps I am missing something? : "withdrawing of the cash will not be using borrowed money so there is no interest to claim. But indirectly there will be because the interest on the investment loan will increase and the interest on this loan will be deductible against the investment property to which it relates"

 

you might be talking about this:

Tax Tip 82: Taking money from an offset account on an IP and Claiming Interest Tax Tip 82: Taking money from an offset account on an IP and Claiming Interest

 

Many Thanks Terry. Yep I think that is correct. I don't intend to pay anything into the actual loan other than P/I payments. I wanted to go IO but CBA wont let me for the first 6 months for some reason. The only drawings from the offset account will be to purchase shares. I hope that is a legal way to do it.The interest rate is better than a LOC which is why I went that way, but no good if it ends up not being tax deductible. Appreciate your advice Terry. I've read a few of your posts and very informative.

 

The key concern is that the loan then has a blended purpose. Each $ drawn from the offset increase the interest on the loan by 5c (pro-rata) but its for a different purpose to the original loan (property acquisition). With repayments, new borrowings etc in no time you wont have any idea what the portion is that relates to the IP and how much relates to shares.

I hear people say - But its all deductible. Maybe, maybe not. The ATO still want to ensure each deductible purpose can be reasonably determined. If the property became a PPOR later how would you work out the exact deductible amount of inteerst ? You cant and the ATO would just deny the deduction. Impose penalties maybe.

A loan split so there is a shares portion that isnt linked to the offset may make more sense.

 

Hello Paul. Thanks so much for the input. So the loan was never intended to be used to purchase anything other than shares. There is no property purchase involved. Once the loan was approved, the bank (CBA) deposited all the cash directly in my main account - which to be honest I didn't realise they would do. So same day I called the bank and set up a 100% offset account and moved all the cash into it. Over time I intend to draw money from the offset account to purchase shares (nothing else) as opportunities arise. Is there some other way I should have set this up? I'm a bit concern I am doing something I could get pinged on later on.? If there is any doubt I will close the loan and start again.

 

Ah, in this case the interest would not be deductible - partially at best.

 

Transfer all the cash back into the loan to pay loan account back fully and then redraw/transfer directly into trading account to purchase shares if your loan allows you to transact directly (some do, some don't - pretty sure CBA doesn't). Alternatively redraw directly to offset account when you intend to purchase shares and transfer directly to trading account. Don't mix the borrowed funds with any other funds.

 

I wil look into this. Thanks for all your input Chris/Terry/Paul. Your advice is very much appreciated.