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Moving $ from my LOC to fund deposit for partner to buy IP in his own name

Discussion in 'Accounting & Tax' started by bythebay, 30th Jul, 2015.

  1. bythebay

    bythebay Well-Known Member

    Joined:
    23rd Jun, 2015
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    By the bay
    Hi guys

    I have a line of credit in my name only.

    My partner wants to bid at an auction this Saturday. He can get funds for the deposit, but not as soon as this Saturday.

    If I transfer money in my LOC to his bank account for him to pay for the deposit on Saturday to buy IP in his name only, what are the tax and accounting implications for me?

    Will I incur an interest charge on the LOC? Does it get direct debited from my other account or do I need to physically repay into it? Is any interest charge incurred on the LOC (due to transfer of money to partner) tax deductible when I do my personal tax return?

    Only signed up for a LOC recently and never touched it ... so not 100% across how it works.

    Thank you all in advance.
     
  2. KDP

    KDP Well-Known Member

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    22nd Jun, 2015
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    Location:
    Singapore
    Will I incur an interest charge on the LOC?
    Yes, if you utilise it you will incur interest charges.

    Does it get direct debited from my other account or do I need to physically repay into it?
    That depends on the payment terms of your LOC is.

    Is any interest charge incurred on the LOC (due to transfer of money to partner) tax deductible when I do my personal tax return?
    It can be deductible depending on your structure. For example, you would be using the fund to lend money to your partner and he would pay you interest on that. As such, since it's for an incoming producing purpose it would be deductible.

    I would recommend you have a written loan agreement to keep it clear and to avoid issues down the track. Also check with your accountant.
     
  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    You and him are separate legal entities so you should lend him the deposit. Get a written loan agreement in place and charge more than the lender is charging you. Once he gets his loan approved he can repay your loan (ie refinance it).

    Tax implications - he can claim the interest

    But watch out for depositing money in his savings account. Once it hits the account it will be mixed with other funds and the interest won't be deductible.

    You should pay the money directly from your LOC at his direction
     
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  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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