How do you pay your IP expenses?

Discussion in 'Loans & Mortgage Brokers' started by Hanso, 30th Oct, 2015.

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  1. Hanso

    Hanso Active Member

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    I have read recently about using the equity loan(leverage loan) for all IP related expenses. Obviously deposits, stamp duty etc will be drawn from the equity loan, but it was also recommending having all interest repayments for you IP loan coming out of the equity loan and rental income being paid back in.

    I’m interested to get a general consensus of what everyone here does, do you use your equity loan for all IP expenses or do you have all income and expenses flow through an offset against your PPOR?

    Is there any real difference in the two options mentioned above? Pros/cons?
     
    Hanso, 30th Oct, 2015
    #1
  2. Phantom

    Phantom Well-Known Member

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    Interest being paid by a loan? Where is @Terry_w? :D
     
    Phantom, 30th Oct, 2015
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  3. teddy1

    teddy1 Member

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    Hi Hanso,

    My understanding is you cant use a loan to pay interest based on ATO rulings, Terry will confirm.

    You are correct with using equity loan to pay for deposit, stamp, pest etc. These funds should be transferred into a seperate (IP) transaction account and this is only used for IP purchases. Rent should go into the offset account that is linked with the equity loan account

    Cheers
     
    teddy1, 2nd Nov, 2015
    #3
  4. Terry_w

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

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    Terry_w, 2nd Nov, 2015
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  5. S0805

    S0805 Well-Known Member

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    S0805, 3rd Nov, 2015
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  6. Hanso

    Hanso Active Member

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    Thanks Terry that clears it up for me
     
    Hanso, 4th Nov, 2015
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  7. sash

    sash Well-Known Member

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    sash, 4th Nov, 2015
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  8. Terry_w

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

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    I wasn't saying capitalising interest is ok - but that I have discussed it in these threads. In each thread I warned the readers to get a Private Binding Ruling and/or Tax advice.

    Interest would normally be denied where the dominant purpose is to get a tax advantage.
     
    Terry_w, 4th Nov, 2015
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  9. sash

    sash Well-Known Member

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    Yep......spot on...someone I know found out the hard way...
     
    sash, 4th Nov, 2015
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  10. Terry_w

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

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    What happened to him? Fine?
     
    Terry_w, 4th Nov, 2015
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  11. sash

    sash Well-Known Member

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    I believe no fine...but disallowed.
     
    sash, 4th Nov, 2015
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  12. DaveM

    DaveM Well-Known Member

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    All rent into the account of the entity that owns it (either ppor offset or unit trust accounts). Opex and r&m expenses paid from these accounts.

    All repayments from PPOR offset as I use unit trusts so I am the borrower. Excess from the unit trusts disbursed every 2-3 months to beneficiary (me).
     
    DaveM, 4th Nov, 2015
    #12