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Using Lines of Credit

Discussion in 'Accounting, Tax & Legal' started by Muz, 3rd Sep, 2005.

  1. Muz

    Muz Member

    Joined:
    15th Aug, 2005
    Posts:
    21
    Location:
    Tassie
    Hi Everyone,

    Regarding Lines of Credit

    Currently we have used our Lines of Credit to purchase Special Units in our HDT.

    Do things start to become messy if we use the same LOC's for maintenance of our IP's outside our HDT structure?

    What are the implications in say apportioning interest at tax time?

    Also what are the implications if we pay back some of the LOC's at some stage? :confused:

    Would it be easier to redraw funds for maintenance from our existing IP's outside our HDT for maintenance on those properties and leave the LOC's for purchasing Special units only?
     
    Last edited by a moderator: 3rd Sep, 2005
  2. NickM

    NickM Co-founder Staff Member

    Joined:
    20th Jun, 2005
    Posts:
    321
    Location:
    Sydney
    Hi Muz
    Whilst the interest is all tax deductible, the interest used for the purchase of the units in the HDT will go into a different item in the ITR compared to the IP part of the interest.

    A reasonable method of apportionment is OK.

    Paying back is OK, but you must ensure that any subsequent redraws are for tax deductible purposes. I would recommend trying to use a mortgage offset acct rather than pay down the LOC. A good mortgage broker can help here.

    a 2nd LOC would be the easiest solution to your problem

    cheers
    Nickm
     
  3. Muz

    Muz Member

    Joined:
    15th Aug, 2005
    Posts:
    21
    Location:
    Tassie
    Loc

    Many thanks NickM :)
     
  4. Rolf Latham

    Rolf Latham Well-Known Member

    Joined:
    15th Aug, 2005
    Posts:
    45
    Location:
    Gold Coast and Sydney
    Hiya

    this is where it helps to be able to use flexible lenders that have no fees/charges for changing things around except your annual package fees.

    We recently did a rejig for a client of the dragon bank and the result was almost 600 bucks out of pocket AFTER negotiation of fees.

    ta
    rolf