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Loan variation/s

Discussion in 'Accounting & Tax' started by dabbler, 4th May, 2016.

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  1. dabbler

    dabbler Well-Known Member

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    Hi All,

    Have a few split loans, one is PPOR atm....

    I want to reduce PPOR split and move to another existing split that is rather small, this existing split has been used for initial deposits/costs.

    So I can either pay down x amount on PPOR then transfer across to smaller split, or transfer the debt then put the same amount of cash into that loan split before continuing with further costs on IP.

    Will it make any difference ?

    I will be asking accountant when time comes to not claim any interest until after is rented anyway.
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    It depends.

    If a mixed loan then Yes it will make a difference.

    If you pay down and then split you will be reducing all portions.

    See
    Tax Tip 44: How to Un-Mix a Mixed Loan

    If not a mixed loan and you just want to pay down and reborrow then it doesn't make a difference.
     
  3. dabbler

    dabbler Well-Known Member

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    Hi Terry.

    I never mix any loans, if it is for investment purposes, then that is all it is for.

    In this case the 2 loans already exist

    PPOR loan

    And existing loan split

    The existing loan split was rather small loan capacity that had only 2.5k drawn for use on another investment, that 2.5k was put back on the loan via a cash payment.

    I have since used the loan for initial deposit and futher deposit on investment.

    I want to expand the credit on this existing split, it costs nothing to change the loan by variation, the extra capacity will come from lowering the main PPOR loan, so I can either take of say 20k from the PPOR and add it too the existing split, then pay down the 20k with cash before continuing on with payments for investment

    or

    Pay 20k into PPOR loan, then vary loans and transfer the ability to draw extra 20k from existing split.

    If I do not claim any interest in these interim periods since loan split was made till investment process is complete, then ther e is no chance of claiming any interest that would be questionable.

    Probably over thinking it again, as it really should not matter as long as any and all interest is only related to the investment & the only purpose of the loan to exist is for investment.

    If it all sounds too messy, I may be able to create another split and have this deleted, but I am not overly confident they would get it all done right and in time if I complicate it too much :)
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    I am not sure what you mean, so am reluctant to comment.

    Example
    $100,000 outstanding on PPOR loan, non deductible.
    $20,000 cash in offset.

    Pay down PPOR by $20k and split into 2
    $20,000 for investment
    $80,000 for the original PPOR purchase

    This would be ok
     
  5. dabbler

    dabbler Well-Known Member

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    That is ok.

    The PPOR loan exists 100k

    The split already exists 30k with 10k drawn for deposit already

    I can vary the loan to lower the PPOR to 80k which will make the split 50k and would then be 30k drawn, and immediatly would apply 20k cash to the split so it then is only drawn 10k again, before proceeding with the rest of the costs coming from this split.

    if interest claimed starts after all this is complete, the loan should, for all intents and purposes, not be a problem.

    The other way is to pay 20k to the PPOR with cash before doing the variation to both loans, either way, it is just changing the limits on the loan/s , purpose will be same.