I have some spare money which I am thinking of paying off the mortgage to my property which is under LAQC. However, I am thinking of withdrawing it later once I found a property which I would like to buy under our name to live in (not under the LAQC), am I allow to do that, I am not sure how the tax part going to work out, does the IRD allow me to withdraw money and claim for loss again?
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What it would be is a loan from you to the LAQC. The LAQC uses the money to repay the mortgage. When you want the money back, the LAQC raises a mortgage and repays its loan to you.
The issue to be careful with is the bank may not reloan you the money as they may prefer the new lower LVR that you have.
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Very good point.
AndrewC: The easiest way to look at things is to treat you (and your wife) as one entity and the LAQC as a completely separate entity - cos that's how the law treats it.
You can lend money to the LAQC, which can then use the money to reduce the debt that the LAQC owes to the bank.
Assume that at some point in the future, you conclude that the property market has reached the bottom and that you want to buy. You can demand that the LAQC repay the loan, but it won't be able to unless it the bank co-operates - and if the market is near the bottom, the bank is not likely to want to co-operate. (which is CJ's point, using more words.)
My suggestion is to lend the money to the LAQC and take a second mortgage as security. This will require the consent of the bank, being the holder of the first mortgage. If you do it this way, the argument about LVRs is settled now, rather than at some point in the future. (But the bank might still say 'no'.)
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Split your loan into 2. Ask for one to be a revolving credit. Pay the money into the RC account and it is available to redraw later. They may take the RC of you but if you don't pose any issues then this is unlikely.
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As the fixed loan will go into floating end of May, I presume it won't be a problem with the bank if I pay it after it is in floating but not closing the account. Then when I need to use it later, I can just withdraw it from the floating account, am I right?
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Careful about "loan" structuring
Originally posted by Green Fish View PostVery good point.
You can lend money to the LAQC, which can then use the money to reduce the debt that the LAQC owes to the bank.
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Originally posted by AndrewC View PostAs the fixed loan will go into floating end of May, I presume it won't be a problem with the bank if I pay it after it is in floating but not closing the account. Then when I need to use it later, I can just withdraw it from the floating account, am I right?Hamish Patel | ph: 09 625 4693 | mob: 021 625 693
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I thought there was 2 questions.
1. Can you do it.
A. Yes. As Mike said easiest way is to set up the LOC.
2. Will IRD let you claim the interest when you redraw so you can buy a home for yourself.
A. No. The purpose of the loan is to purchase a property for you to live in and it is the purpose of the loan that matters. There are ways to skin this cat though.
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CJ is correct.
It's just a refinance. If the LAQC has an ANZ loan, and uses a Westpac one to repay it, its definetly still tax deductible. So if an LAQC has a loan to you personally, and uses another bank to repay it, the interest will be deductible.
Make sure proper minutes are done by the company, but shouldn't be a problem
RossBook a free chat here
Ross Barnett - Property Accountant
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Only if the loan to you is deductible though.
So that means the LAQC needs to pay you interest and you need to return that in your tax return.
The interest is deductible to the LAQC but the income is taxable to you.
It's starting to look a bit messy isn't it.
So yes if done correctly however most people won't go through the steps required to do it properly.
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Originally posted by tpr2 View PostOnly if the loan to you is deductible though.
So that means the LAQC needs to pay you interest and you need to return that in your tax return.
The interest is deductible to the LAQC but the income is taxable to you.
It's starting to look a bit messy isn't it.
So yes if done correctly however most people won't go through the steps required to do it properly.
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