How the wrong structure can cost you thousands: Part 1
Making just a few small errors with your finances could completely derail your portfolio and cost you significant time and money.
I see countless investors get their lending so wrong. They visit the wrong broker or bank and they royally mess up the loan structures for investors, costing them many thousands in lost tax deductions.
Let’s take the example of buying your first investment and let’s assume you already own your own home.
The ATO is very clear. It matters not what property you use as security, but rather “the purpose of the funds”.
Far too many inexperienced lenders simply undertake a loan increase on the owner-occupied property and use these funds for investing. Fine so far. But many lenders fail to “split the loan” away from the owner-occupier loan, meaning personal debt and investment debt is all mixed together.
How then does the ATO or their accountant correctly calculate which part of that mix is deductible? What happens when you make a payment to your home loan which is mixed with investment debt, and which do you tell the ATO you are paying off first?
It’s vital you choose the right broker/banker who knows what they are doing and split your loans correctly. It could cost you thousands!