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Home loan line of credit to trade with

Discussion in 'Accounting, Tax & Legal' started by michaelbb64, 26th Apr, 2010.

  1. michaelbb64

    michaelbb64 Member

    Joined:
    25th Apr, 2010
    Posts:
    5
    Location:
    Logan, Queensland
    We have a $250,000.00 home loan in a line of credit format. We have currently only used approximately $110,000.00 of the loan.

    My plan was to trade with $100,000.00 via a online account

    How do we assign interest component of the invest part of the loan as a tax deduction ?

    Which is the most Tax effective share trading account

    thanks

    Michael
     
  2. Johny_come_lately

    Johny_come_lately Well-Known Member

    Joined:
    1st Jul, 2009
    Posts:
    703
    Location:
    SE Queensland
    Hi michaelbb64

    There is an old joke; "How do you make a small fortune". Answer; "Start with a large fortune!". Be careful when borrowing money to invest. I have had a look at some trading software, and it looks to me a bit like a casino. Perhaps trade with only $10,000 to test your skillls.



    Johny.
     
  3. michaelbb64

    michaelbb64 Member

    Joined:
    25th Apr, 2010
    Posts:
    5
    Location:
    Logan, Queensland
    thanks Johny

    I have not committed any funds yet just researching information regarding this as an investment option

    michael
     
  4. Tropo

    Tropo Well-Known Member

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    Location:
    NSW
  5. Superman

    Superman Well-Known Member

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    6th Nov, 2007
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    Location:
    Gold Coast, QLD
    Hi Michael,

    To answer your question on the apportionment of interest, it is worked out on a proportional basis based on the use of funds.

    Using your example it would be $100k/$210k (47.6%) of the interest would be deductible.

    What you SHOULD do is go and chat to your current bank. See if they can reduce the limit on the $250k LOC down to $150k (current $110k loan + $40k for emergencies). Then to keep things clean get them to set up a separate LOC for investment purposes.

    This will keep it a lot cleaner. An make it easier come tax time.

    The separate LOC for investment purposes should be able to be set up in either your name personally, jointly, your wife/partners name or even the name of a family trust. The security will still be the same i.e. your house.

    If your current bank won't do this, or give you a puzzled look when you ask - then you are probably with the wrong bank.

    I don't really know what you mean in regards to a 'tax effective share trading account' - choosing a trading account / platform is like choosing the right tool for the job - the tax implications come from using the tool (i.e. how much income / capital gains you produce).

    Have you thought about seeing a financial planner? A discussion with a good quality financial planner will ensure you are going in the right direction with what you are trying to achieve.

    I hope this answers your questions and provides you with some direction.

    SM
     
  6. michaelbb64

    michaelbb64 Member

    Joined:
    25th Apr, 2010
    Posts:
    5
    Location:
    Logan, Queensland
    thanks superman

    i have spoke to my bank

    the type of trading account -- trust, joint account etc

    seen a financial planner

    thanks

    Michael