How to extract equity once you have used all the splits without mixing loan?

Discussion in 'Accounting & Tax' started by Otie, 1st Feb, 2018.

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  1. Otie

    Otie Well-Known Member

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    I have a PPOR loan, which I have 3 equity splits connected to it which have been used for other house deposits and a car.
    My bank only allows you 4 splits per loan account.
    I am in a situation where I can extract more equity for a new purchase, but I can't make any more splits. The bank will only allow the top up funds to be dumped into one of the splits that is a car loan split.
    How do I avoid mixing the splits? What happens if you mix a split and keep good records of the ins and outs?
     
  2. Ross Forrester

    Ross Forrester Well-Known Member

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    Just do a fair and reasonable allocation TR 2000/2

    So an excel spreadsheet can track them. The down side is that you have to pay the loan down proportionality to the components in the mixed split.

    “21. Where a taxpayer makes repayments over and above the required minimum payment and the line of credit facility comprises one mixed purpose sub-account only, the taxpayer cannot choose to notionally allocate the repayments to a particular portion of the total debt, e.g., the non-income producing portion.”
     
  3. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Two steps really.

    1. Depends if its deductible or non-deductible. If new purpose is non-ded and you have a non-ded split make sure its blended with that one. Otherwise its its deductible...
    2. Blend a deductible split and as Ross says measure the % of each at the date you draw down the new purpose and there after that same % operates. I always suggest taking care not to draw down loads of separate costs as this can make that % allocation a nightmare. If you are doing that for reno costs I suggest easier to draw ALL the funds in one go to a clean account and pay from there. Calc the % Any surplus you repay later. recalc the % afterwards and use that if you do. Makes the % allocation a bit easier.
     
  4. Simon Moore

    Simon Moore Residential & Commercial Mortgage Broker Business Member

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    Or switch to a lender that allows more splits ;)
     
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  5. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

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    If you have enough equity for a few deposits, it may pay to move the loan to another lender - some let you have unlimited splits.

    If you love paperwork, you can mix them and keep track as mentioned above, but quite frankly I've done that and it's time consuming and more annoying than it needs to be.
     
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