Tax Tip 4: Borrowing to Pay investment expenses

The insurer pays for the repairs and makes good the property. A revised QS report can be a benefit. A deduction wont be. If you repaid the loan and reborrowed to pay the costs the deductions wont change ? If you credit say the PPOR debt and inflate deductions it could be argued that Part IVA applies...If a higher interest deduction is the predominant purpose.

If its destroyed a range of other issues occur.

 

hi guys

Understand the interest on amount borrowed for IP operating exp. is deductible. Will the expense be ductible in the same year as well given it was funded by loan and not cash - wont that be double dipping?

 

See above - all explained.

How is it double dipping?

 

lets say i borrow $100 to fund expenses.

my claim
$100 deduction in that year.
Claim interest cost on $100
$100 increase in debt as well which will reduce tax payable on sale

Isnt 1 n 3 above essentially double dipping?

 

Nope.
Debt has no bearing on the amount of tax paid on sale.

 

oh okie. Thanks

 

Hi there

I have an investment IO portion which is fully used up. I also have an LOC facility for investment purposes. I have a new debit card linked to the investment IO portion which I can redraw to (it will only be used for investment expenses). If I want to pay by debit card when bpay is not available, am I fine transferring from LOC to investment IO portion for the funds to be available to redraw to the debit card.

Thanks
The newbie landlord

 

A debit card is not borrowings. See tax tip 1.

 

Hi Terry,
Is there a tax tip written on borrowing money from an IP for the deposit of PPOR?
How to make it not contaminated ?
thanks

 

So if I instead get a credit card paid off by the line of credit then all good?

 

I don't think I have written a tip specifically on this. But it is very simple. Just borrow against the IP under a separate split.

 

I wouldn't say all good.

Tax Tip 12: Credit Cards and Tax Issues https://propertychat.com.au/community/threads/tax-tip-12-credit-cards-and-tax-issues.2614/

 

Thanks - will get a brand new credit card to be used for expenses for a single investment property only. Can then pay it off via bpay from LOC to transfer the debt to LOC

 

@Terry_w, Thanks for posting all the tax tips. Hope I'm not repeating a question (highly likely I am.. so apologies).

Can I please explore the statement: "...as long as you can pay direct from the loan without any detours."

Say I have a loan of $100, and offset account is funded with $100. So no interest is paid.
The $100 loan, although secured against a investment property, was used for private expenditure (PPOR purchase).

If I use $50 from the offset to pay for investment property bills, reading your posts, I understand that the interest on the $50 is not tax deductible.

Can I use a LOC to transfer $50 to the offset, and then claim the interest on the LOC?

Thanks again for all your valuable insights!

 

Hi Kay

Not sure what you mean. Sounds like you want to borrow and park money in an offset and then use it. See my tax tip 1.

 

No. Since the use of the LOC $50 merely was parking into a offset there is no deductible use for the $50. Its just savings.

LOC interest can be non-deductible if not isolated and used for a single deductible activity.

 

understood... thanks for the response guys.

 

What type of loan would you use for direct payments of expenses? Eg. My equity loan allows payments to third parties but on my council rates notice it doesn't provide account details for a bank transfer, but rather Bpay, bpoint in person or direct debit

 

LOC