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finance / tax scenario

Discussion in 'Property Finance' started by Elives, 3rd Aug, 2015.

  1. Elives

    Elives Well-Known Member

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    i have 50k in my bank account and 1 ip.

    im looking for ip 2 and will most likely will have bought it within 3 months.

    i can put 50k into ip 1 to offset the interest (it's a redraw facility not offset account) will be 200 better off per month roughly. what are the pro's / cons of doing this?

    i'll save $600 by doing this.
     
  2. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    You will lose deductions going forward. If you do not have a PPOR it will cost you $50,000 x 5% = $2500 per year in lost deductions for the rest of your life potentially.
     
  4. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes true but if a PPOR is bought at some stage you will have $50k tied up so this will cost you in lost tax deductions and higher non deductible interest.
     
  6. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Not necessarily - related party loan strategy could enable someone to have their cake and eat it too. But not possible for everyone.
     
    Jess Peletier likes this.
  8. Elives

    Elives Well-Known Member

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    i understand what your saying but in the scenario where i'm 100% using it to buy ip 2. does it matter? if in the future and i sold ip 2 i would then get the 50k less taxes back and could use this for ppor. (if sold for same price as bought)
     
  9. Elives

    Elives Well-Known Member

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    how do i split a loan and is it expensive / a hassle? and when i split a loan it of course would be with the same lender? could i use a different lender to do this?
     
  10. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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  11. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    It will matter if you wish to buy a PPOR and/or not sell the IP. If not then probably not.
     
  12. Blacky

    Blacky Well-Known Member

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    good reason why you should have an offset account rather than re-draw facility. Its been costing you about 4% while it has been sitting in your bank account.

    Do you have any additional equity in IP1 you could draw before using the cash as a deposit?
    If not might be one of those cases where using cash security could work out well in the long run?

    All depends on your financial and tax situation. Seek professional advice - rather than listening to some numpty (eg. me) on the interweb. :rolleyes: