Tax Tip 12: Credit Cards and Tax Issues

So, if you have 1 credit card per IP's expenses. And you keep paying it off in full on time every month, you haven't been charged any interest by the credit card. So, what exactly is going to be tax deductible in such transactions ?

 

Nothing.

 

Ahh. Just re-read the original post and it makes sense now.

 

I'm new to property investing and have been reading as much as I can lately. I found the following advice along the lines of:

If you have a balance on your credit card which is mixed, repay the full balance on exactly the same day. Use personal funds for the private amount and your LOC for the property related expenses. This won't affect the deductability of the loan.

Does this sound right? I thought you couldn't pick and choose what part you want to repay. Any repayment would be split between private and investment expenses, no matter where you paid it from. Or does paying off the full amount, so the CC balance is $0, make a difference?

 

Doesn't sound right to me.

Was the person giving the advise a tax lawyer or a tax agent? if not ignore it.

 

Yes, from a freely available pdf guide from a major accountants group. I know guides are just guides but it seemed to go against everything else I'd read about mixed loans.

 

Old thread but you can attach a debit card to an AMP pro pack loan (LOC or split) or loan offset account.

 

Credit Card via Paypal question?
PPOR split loan has not come through as yet so I do not have access to the investment funds for deposit, stamp duty etc.
I have a clean credit card to pay for expenses which I will pay off with split loan when it comes through (could still be a few weeks).

The building survey has been completed but the company will only take Bank transfer or Paypal.
Question:
If I use my CCard to pay the invoice through Paypal would this be an 'intermediary' and as the funds are not going direct, would it cause issues for deduct-ability?
thanks.

 

Paypal just facilitate a card charge. They arent a lender. Paypal isnt a refinance. The originating bank is still the lender. Not any different to paying online using your card. The merchant just acts as the intermediary.

 

Cool, thanks Paul@PFI, just thought I'd check

 

If you have a mixed use personal credit card but pay off the balance to $0 then pay for deductible expenses only using the credit card, does the interest accrued on the card become 100% deductible?

 

If you pay it down to zero it would no longer be a mixed loan. see the first post

 

HOW you pay doesnt change the deductibility unless you cant show it was paid or it was paid by someone else without a legally enforceable obligation to pay them (eg If you buy a laptop and there a finance contract its fine. But if mum gives it you as a gift its a problem) Just the interest consequences arise from use of a card. If there is no interst claim its not a issue. When the ATO audit they want to see what costs you claimed AND how it was paid. Could be cash (receipt), could be EFT (debit to bank) , Bpay etc or card. They want to see the invoice and how it was paid.

 

TR 2000/2 is the relevant ruling on re-use debt facilities such as LOCs and even cards. It mentions multiple sub accounts but in many cases that aspect can be ignored.
https://www.ato.gov.au/law/view/pdf/pbr/tr2000-002.pdf

 

If you borrow to pay it off this is just a refinance the interest on the loan used to pay it off could be deductible, plus you might get some points and interest savings during the interest free period.

 

Related Tip
Tax Tip 517: How to Borrow to pay ‘cash’ expenses Tax Tip 517: How to Borrow to pay ‘cash’ expenses

 

The expenses if they are deductible expenses.