{"id":6428,"date":"2015-11-23T01:00:06","date_gmt":"2015-11-22T14:00:06","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=6428"},"modified":"2015-11-23T01:00:06","modified_gmt":"2015-11-22T14:00:06","slug":"lines-of-credit-gst-capital-gains-tax-on-vacant-land","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/lines-of-credit-gst-capital-gains-tax-on-vacant-land\/","title":{"rendered":"Q &amp; A: Lines of Credit, GST, Capital Gains Tax on Vacant Land &#8211; Ken Raiss"},"content":{"rendered":"<p>&nbsp;<br \/>\nIn today&#8217;s show we get answers to a number of your questions from Chan &amp; Naylor\u2019s <strong>Ken Raiss<\/strong> to do with lines of credit, GST and Capital Gains tax on vacant land and transferring equity from a principal place of residence into a trust.<br \/>\n&nbsp;<\/p>\n<h4>Transcript:<\/h4>\n<p><b>Kevin<\/b>:\u00a0 A very interesting question in the show that we\u2019re going to answer now for Brad. Brad, thank you very much for your question. Brad\u2019s question is:<br \/>\n\u201cI have a finance-related question specifically about the intricacies of lines of credit. All of the articles I find say that you should get a line of credit, but none really drill down any deeper into the intricacies of using one.<br \/>\n\u201cI understand that you would use your line of credit for investing costs such as a deposit on a new property or the levies or rates for a property. My uncertainty is whether I am then able to climb the interest charged on the line of credit.<br \/>\n\u201cTo make it more complicated\u201d \u2013 thanks for doing that, Brad \u2013 \u201cwhat if you were to pay your investment loans off using this line of credit? Surely then you couldn\u2019t claim the interest on your line of credit as well as your investment mortgage because that would be double-dipping, right?\u201d<br \/>\nWell, let\u2019s get an answer for you, Brad, because joining is Ken Raiss, our expert in all of these matters from Chan &amp; Naylor.<br \/>\nGood day, Ken.<br \/>\n<b>Ken<\/b>:\u00a0 Hi, Kevin, and hi, listeners.<br \/>\n<b>Kevin<\/b>:\u00a0 Just answering Brad\u2019s question there, would you like to dive in and give us a bit more information, too, about lines of credit?<br \/>\n<b>Ken<\/b>:\u00a0 Okay. Lines of credit or an equity loan \u2013 different people call it different things \u2013 that\u2019s when you go to your bank and actually ask to borrow against that equity that you have built up in your property. The equity is that difference between the market value and the debt.<br \/>\nA lot of our clients use that line of credit for two principal reasons. The first, as you were saying, Brad, is to have that amount of money available to pay deposits if they want to buy a property or to pay any of the ongoing expenses of owning that property if their cash flow isn\u2019t enough. If you\u2019re using it for investment purposes, such as the deposit or the costs, then the interest is deductible. The tax office looks at the purpose of the loan. If you borrowed the money for investment, then it\u2019s deductible.<br \/>\nThe other reason people use a line of credit is what I\u2019ll term a buffer. A buffer, again, is a line of funds available to you in case something goes wrong with that property and you can\u2019t fund the repayments. You could lose your job, interest rates go up, the tenant<b> <\/b>leaves, etc. Again, in all those instances, the interest would be tax-deductible because the purpose for investment.<br \/>\nThe second part of your question is very interesting, which was, \u201cCan I pay off the debt using the line of credit, and is that money tax deductible?\u201d In simple terms, the answer is actually yes because what you\u2019re doing is substituting your original bank loan \u2013 because you\u2019re paying off debt. That would have been a loan from a bank. You\u2019re now paying off that bank debt and substituting it with the debt from that line of credit.<br \/>\nIt\u2019s the same as if you would have refinanced and gone to a different bank. Because you\u2019re using it for investment purposes, the interest on that would be tax-deductible.<br \/>\n<b>Kevin<\/b>:\u00a0 That\u2019s certainly good news. I\u2019m sure Brad\u2019s going to be pleased to hear that, Ken. Well done. It\u2019s a great question, and what we\u2019re going to do, Ken, is give Brad a 12-month subscription to <i>Australian Property Investor<\/i> magazine for that question. It\u2019s outstanding.<br \/>\n<b>Ken<\/b>:\u00a0 A very good question.<br \/>\n<b>Kevin<\/b>:\u00a0 Hey Brad, we\u2019ll be in touch with you. We\u2019ll get your mailing address and we\u2019ll make sure that you get the next in the series of <i>Australian Property Investor<\/i> magazine. We give one or two of those away every week for our questions. I think we\u2019ve given two away this week, but you can join in the fun, too, and who knows? We might choose you as one of those as well. Just send your questions in through the website or directly to me, Kevin@RealEstateTalk.com.au.<br \/>\nBy the way, too, if you are already a subscriber to <i>Australian Property Investor<\/i> magazine, we\u2019ll extend your existing subscription by a further 12 months at no charge. So there you go. Go to it.<br \/>\nKen, I want to thank you because you\u2019re always available for us. We really do appreciate it. You give us some great advice, and our advice to you is to always make sure that you deal with Chan &amp; Naylor.<br \/>\nKen, thanks for your time.<br \/>\n<b>Ken<\/b>:\u00a0 Thank you, Kevin, and thank you, listeners.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>&nbsp; In today&#8217;s show we get answers to a number of your questions from Chan &amp; Naylor\u2019s Ken Raiss to do with lines of credit, GST and Capital Gains tax on vacant land and transferring equity from a principal place of residence into a trust&#8230;.<\/p>\n","protected":false},"author":176692471,"featured_media":6106,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[34,10,11,13,17,25],"tags":[101],"class_list":["post-6428","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance-topic","category-kevin-turner-sponsored-channels","category-kevin-update","category-latest-story","category-property-investment","category-sponsored-channels","tag-podcast"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Q &amp; 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