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Loan Splits, Refinancing and Tax

Discussion in 'Accounting & Tax' started by CatCafe, 22nd Sep, 2016.

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  1. CatCafe

    CatCafe Well-Known Member

    Joined:
    19th Jun, 2015
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    156
    Location:
    NSW
    Say for instance I have a property "property A" with the following loans and loan purposes:
    • Loan 1: Original 80% loan for property A
    • Loan 2: Equity Topup. Used for purchasing costs and deposit on property B
    • Loan 3: Equity Topup. Used to purchase shares in partner's name

    Right now I'm getting separate loan statements for each loan, so I can easily allocate the interest payments to the respective investment come tax time. Very clean and straightforward.

    If I refinance property A, my understanding is that I'll lose the loan splits and they'll get rolled up into a single loan. Come tax time, my accountant advised that I'll need to apportion the interest expense based on the original loan amounts. Having a single loan for three different purposes seems a little messy to me. Is there a cleaner way by any chance? Or am I overcomplicating this?

    Have any others come across a similar situation?
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    18th Jun, 2015
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    Location:
    Sydney
    Very common and there is a simple solution - refinance yet maintain the same split.
     
  3. superman

    superman New Member

    Joined:
    23rd Sep, 2016
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    Location:
    Sydney
    If possible choose a shorter repayment period, I think that will be better
     
  4. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
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    Location:
    Perth WA
    It's very easy to maintain the splits after the refi - there's absolutely no need to roll it all into one.