LOC Debt Recycling..

Hi Everyone I have been trying absorb as much content in these forums as possible and also educate myself little more on possibilities.

I have been researching both setting up a trust and also maybe using a LOC and maybe some debt recycling going forward. Something just occurred to me though..

Say as example I have PPOR and mortgage of 500K with 200K either sitting on offset or bank account etc instead of investing the 200K in LIC's and looking at LOC with debt recycling down the line I would be better off paying down the non deductible home loan now then taking the LOC now for 200K against the mortgage which would be tax deductible and either reinvest the dividends to buy more shares or pay down some more non deductible debt with the dividends.

not looking for advice but this is doable right?

Apologies if I am either missing the completely obvious here or repeating a question that has already been asked!!??

 

It depends.

Because a trustee is a separate legal person you could lend the trust money and later take it back again. You might do this if the house is going to be rented out soon and you don't want to pay down the loan.

If you plan to stay long term you could pay down the loan and reborrow and onlend to the trustee (assuming not the same person) and the trust will be the entity that claims the interest.

 

@Rolf Latham is the go to man to speak to. Make contact with him and go thru the options.

And yes, repaying the ppor loan and setting up a new 'investment' loan for the same value is the idea. Capitalise the interest on this loan, and pay the dividends into the home loan, 'swapping' ppor debt for investment debt.

 

Whoa, a potentially dangerous thing to do. Make sure you get tax advice first.

 

You would probably want a private ruling. But I'm not a tax guy.

 

Thanks for the information guys I am definitely going to run this past my accountant I assume this would only potentially cause tax issues if I was buying the shares in a trust if I was doing this all in my own or wife's name assume there would be no issues putting a lump sum on home loan then taking a tax deductible LOC to buy shares..

 

Not sure what you mean about the trust bit, but if you borrow money you can lend to your wife who can then buy the shares. if you are both on the loan then no loan agreement needed.

 

Sorry Terry I meant rather than taking a LOC then buying shares in a family trust's name etc. I took the LOC out and bought shares in either my name or my wife's name I would assume the interest would then be tax deductible same as if I took the LOC and purchased an investment property? would be straight forward I'll run this all past my accountant as have already mentioned setting up a trust with him..

 

Yes interest should be deductible if you buy shares expected to pay dividends