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Using additional advance and HDT

Discussion in 'Accounting, Tax & Legal' started by TryHard, 4th Aug, 2006.

  1. TryHard

    TryHard Well-Known Member

    Joined:
    17th Aug, 2005
    Posts:
    863
    Hi guys

    I really should know the answer to this. In fact I pontificated at the missus last night till half way thru my explanation we both realised I have no idea what I am talking about :( (harsh realisation, and rare to admit :) )

    OK, so we have an IP and borrowed $230,000 in a normal investment loan as our HDT. The balance of the purchase was paid by $60,000 from our LOC (as units in the HDT that owns the property).

    The property is now worth $390K and the bank (ie. the same one with the $230K) has graciously allowed us another $70K ish.

    So that $70K, when we receive it, what 'usually' happens ? :

    OPTION 1
    $230K - remains deductible
    $60K - units in HDT remain deductible (ie. we don't redeem them?)
    $70K - if used for further investment, will be deductible

    OR

    OPTION 2
    $230K - remains deductible
    $60K - units redeemed using part of the proceeds of the new $70K
    $10K - if used for further investment, will be deductible and the other $60K (now available from the redeemed units) if used for further investment, will be deductible

    OR

    ?

    I'm trying to picture what the usual sequence of events is in the "Navra" way of rolling the spare equity into the NI fund. I'm guessing Option 1 is the answer. But then ... I'm already having a bad day.

    Oh, and before anyone says 'talk to your accountant', NickM is my accountant but I've made a conscious decision to give him 2 full weeks without any communication from me. So I thought I might be able to get some community advice in the meantime ;-)

    Cheers and THANKS !
    Carl
     
  2. TryHard

    TryHard Well-Known Member

    Joined:
    17th Aug, 2005
    Posts:
    863
    I'm only writing this in a selfish attempt to get the question above back in the New Posts. Sue me, its Sunday and I'm uncharacteristically sober ;-)

    EDIT - that's weird - it doesn't go in the New Posts :(
     
  3. Simon Hampel

    Simon Hampel Co-founder Staff Member

    Joined:
    9th Jun, 2005
    Posts:
    4,619
    Location:
    Sydney, Australia
    Actually it does - for everyone else. You've already read it, so it no longer shows up for you in new posts. If you check Today's Posts, you should see it.
     
  4. TryHard

    TryHard Well-Known Member

    Joined:
    17th Aug, 2005
    Posts:
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    Oh good :) I hope someone who sees it, answers it, then ;-)
     
  5. NickM

    NickM Co-founder Staff Member

    Joined:
    20th Jun, 2005
    Posts:
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    Location:
    Sydney
    Carl,
    I cannot possibly let you have another sleepless night. :)

    Option 1 seems to be on the money.

    OPtion 2 is the same as 1 except you then redeemed the units.

    If you decided to gear the $70K into Navra the interest would be tax deductible

    cheers
    nick
     
  6. TryHard

    TryHard Well-Known Member

    Joined:
    17th Aug, 2005
    Posts:
    863
    Aw no fair Nick - I was hoping to impose on someone else other than you ! ;-)

    Thanks mate - makes sense now...

    Cheers
    Carl