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Creating loan - do you think this would fly

Discussion in 'Accounting & Tax' started by dabbler, 18th Nov, 2015.

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  1. dabbler

    dabbler Well-Known Member

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    Have read info on getting loans from friends, family etc, also on doing secured deposits.

    If you have a bank that allows multiple splits, offsets and re draw etc, and you are aware that if the home becomes an IP later you will have less to deduct, would this work or be questionable.

    Say you have a loan of 200k non deductible on your home, and you have some cash elsewhere & on next purchase, instead of getting cash out of say 100k for deposit and costs , you pay down 100k off 200k loan, start a split of 100k with it's own clean offset to redraw too.

    Would this pass.....
     
  2. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Absolutely. It's a good idea and completely legit if you're going to be buying an IP that will never become a PPOR.

    If the home will become an IP though, you will only have $100k of deductible debt though so bear that in mind.

    If the new IP will ever become a PPOR, it's not going to be a good result.
     
  3. York

    York Finance Broker Business Member

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    But why pay down the 200k non deductible loan with the 100k then split?
    Why not just leave the 100k in offset and split for new IP?
     
  4. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Because the $100k in offset is offsetting non-deductible debt. It's a $200k PPOR loan offset with $100k cash.

    If you take the cash and pay down the loan, you now have a $200k loan with $100k in redraw. If you then split the loan you have a $100k non-deductible loan, and a $100k undrawn loan ready to use for investment purposes.
     
  5. dabbler

    dabbler Well-Known Member

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    Yes, Jess is on the same page I am on, and I cannot see why it would not be ok tax wise, but put it out there anyway.

    My thinking is also, paying down the non deductible now and getting as much deductible with new IP is better because it is right now for tax matters, it also will help if further loan is reqd. If home does become IP, it is not ideally structured anyway and I think by then there may be other things offsetting the effect of income with little deduction.
     
  6. York

    York Finance Broker Business Member

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    Ok. Thanks for explaining Jess.