Using Lines of Credit

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?

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?

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

Many thanks NickM

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