Organising bank accounts for investment property

LNia Grabzo on 27/03/2016 - 18:49

Hello,

I am thinking about purchasing investment property and would appreciate if you could share your experience with structuring bank accounts, so it's easier to claim tax.

My situation.

Currently own a place with mortgage.
Recently refinanced and borrowed 25% more to accommodate the investment property deposit, stamp duty, fees and renovation.

e.g

Current case:

$1000 Home Loan account
$250 Offset account

Moving in to:

$750 Home Loan Account 1 (Bank A)
$250 Home Loan Account 2 (Bank A) - Interest is Tax deductible
$800 Investment Loan Account 1 (Bank B)- Interest is Tax deductible

Would this work for tax, so I can claim tax deduction on interest for both $250 and $800 loans?

Thank you

Financial

Comments

  • oscargamer on 27/03/2016 - 19:31

    talk to an accountant, now, before you do anything

    get a building surveyor to do a pre-entry survey - for deductions

    don't listen to keyboard experts (apart from the above advice ;)

    • Nia Grabzo on 27/03/2016 - 20:28

      Thank you.

      Can you recommend a place to get a good accounting advice in Sydney?

      • oscargamer on 27/03/2016 - 21:56

        Sorry no. I'm down south in Mexico

  • Zerko on 28/03/2016 - 06:28

    Structuring bank accounts is not the big issue. Just make it easy to see what is coming in and out of the IP and that deductible interest isn't mixed with non-deductible interest (as you've done). The structure in which you are purchasing the IP(s) in is more important, especially when you get to a few. At one, in your own name is fine, but when you are up to 3 or 4 purchasing in a trust may have advantages. Speak to an accountant that knows about investing in property. Most don't. There are some that spruik their IP expertise, might be worth going to a "free" seminar to give you some insight. Search "property investment accountant sydney"
    And yes, definitely get a depreciation report done, even if the property is over 30 years old.

  • chumlee on 28/03/2016 - 07:26

    Did you refinance your principal place of residence or another investment property?

  • CheapskateQueen on 28/03/2016 - 19:41

    what you've done should be fine for tax. so long as each account is separate and distinct so that you can direct your repayments to specific accounts. the separation of accounts as you've done is exactly what you need.

    the only potential issue is when you refinanced your home initially, if the additional amount was just added to your original home loan (eg 750 increased to 1000) there may have, at that point, been a mix of the funds so that when you later separated the loan from 1000 to 750 & 250, you were left with mixed funds in each account. tbh though, if there's a clear paper trail of what you've done, it is clear what you've done, and it was pretty concurrent, I wouldn't worry too much, or at all.

    the issue the ATO is usually concerned about is when it's primarily an investment account and then there's 100K or whatever of private expenses mixed in and people are claiming 100% of the interest.

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