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Borrow from LOC for IP repairs and costs?

Discussion in 'Accounting, Tax & Legal' started by amsaini15, 18th May, 2012.

  1. amsaini15

    amsaini15 Member

    Joined:
    11th Jun, 2010
    Posts:
    11
    Location:
    Sydney
    Hi
    Please assist with my dilemma.

    My Current Loan on IP - $288K (IO)
    LOC - $50K

    As per
    "http://www.bantacs.com.au/QandA/index.php?xq=64

    Then set up a line of credit to pay any extra expenses for the
    rental properties. You are not required to use your wages income to prop
    up investment properties. You can borrow to pay these expenses including
    the interest on the loans when you are short and the interest on this line
    of credit would be deductible also. "

    1. Can I pay for Council (approx $1100 per year) and Water ($700 per year) and other repair costs from LOC and put my rent into offset of my PPOR? Will the Interest be tax-deductible?

    2. If I do so, At what point I need to payback into LOC? Can I keep borrowing from LOC until I have borrowed complete $50K (for repairs on IP and other cost associated with it)? Will this mean I can claim tax deduction on full amount - $288K + $50K LOC. What is the rule for borrowing for IP from LOC? ATO should not see it as a way of increasing tax deductible borrowing and paying full rent into PPOR.

    3. I am planning to get fencing done on the IP. Can I use LOC to pay for it? tax deductible again?

    2011 Tax return had $13K loss claimed as negative gearing.
    Income from Rent - $13K
    Interest on Borrowing - $19K

    Thanks
    Aman