澳洲Australia property Something To Be Careful Of ... | Sydney


在澳大利亚 I have been looking at units in Sydneys upper North Shore. Only in Ku-Ring-gai so up to Wahroonga. The area seems to offer good fundamentals, is very popular and in general seems to be a lovely place. My favoured location to buy I think is G Appologies for all the threads, I dont have much time to get organised before the auction on Saturday. I had a question about the solicitor/conveyancing fees. I remember last time I had this done it cost over $1000. But that was soliciting t


While responding to another thread about keeping investment monies separate from personal monies, it reminded me of an article I read in yesterday's Sunday Mail.

From memory, the article covered the story of an investor who borrowed $100,000 to buy an investment (some shares). The investor deposited the loan monies into their personal account and then wrote out a personal cheque to the share broker for the $100,000. When the investor went to claim the loan interest as a tax deduction, the article stated that the ATO rejected the claim.

On first glance, this may seem somewhat harsh or even unfair. For example, if the investor had say $200 in their personal account and deposted the $100,000 loan monies - then one would have thought that, when the $100,000 cheque was written to the broker, surely it was the loan monies that was covered in the cheque.

But, what about this scenario - if the investor had say $100,000 in their personal account and deposted the $100,000 loan amount - how would the investor prove the the loan monies was used to cover the broker's cheque?

IMHO, it doesn't really matter if the article is based on a true story (I am guessing that it is) but it does give another example of why it is wise to always keep investment monies separate from personal monies (I always try to keep business monies separate from investment monies - SMSF, Hybrid trust, etc and both separate from personal monies - means more bank accounts, more in bank fees, multiple books set up in MYOB, etc but does makes tracking of monies easier).

I don't have the article with me so I can't quote from it - I would appreciate any input from our "resident accountants" such as NickM or DaleGG as they may have more knowledge of this particular case. Comments from other Forum members would also be welcomed.  

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I'm not an accountant either, but PriceWaterhouseCoopers are. They have signed me off for years with all moneys channelled through my private bank account and creadit cards. I have a biz, an investment property and a share portfolio, all in joint names but not a company or trust in sight. It works for me.

T  

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Thommo,

I don't have the article with me as I am still at work and the article is at home. As you are in Tville, you may have yesterday's Sunday Mail handy - it was in the Smart Money section if you do have it.

I would appreciate your thoughts after reading the article - from memory, it quoted the case and which court the ATO won their case.

KieranK  

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kierank said:
Thommo,

I don't have the article with me as I am still at work and the article is at home. As you are in Tville, you may have yesterday's Sunday Mail handy - it was in the Smart Money section if you do have it.

I would appreciate your thoughts after reading the article - from memory, it quoted the case and which court the ATO won their case.

KieranKClick to expand...
You have two options Kieran, accept the free advice you ask for or pay for professional advice. At the risk stating the bleeding obvious, Ask a professional!

How could I know how I've run my affairs for 25 years?

T  

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Thommo,

Ease up, I don't think he was disputing your opinion, just trying to guage peoples opinions after reading the article or the case that was quoted.  

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Glebe said:
Thommo,

Ease up, I don't think he was disputing your opinion, just trying to guage peoples opinions after reading the article or the case that was quoted.Click to expand...
He was disputing an opinion he asked for free when he should have asked a professional in the first place.

He asked for our thoughts and when I told him what I've been doing for a quarter of a century he thought i was wrong and refered me to a rag I don't read.

T  

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Thommo said:
He was disputing an opinion he asked for free when he should have asked a professional in the first place.

He asked for our thoughts and when I told him what I've been doing for a quarter of a century he thought i was wrong and refered me to a rag I don't read.

TClick to expand...
Thommo.

Keiran was Not disputing your opinion. Nor was he looking for free advice. In fact Nor was he 'referring you to a rag you don't read'.

He did ask for general discussion. He was interested in what you had to say, and was not arguing with you, simply asking for measured discussion.

Keiran asked you whether you had read the article, and let you know where it was. If you didn't read it but did want to at least you could have found it. If you didn't want to read it, and didn't want to discuss it further you could have simply said 'not really interested thanks' or just not responded.

Oh, and have a re-read, he NEVER said you were wrong, simply asked you for your thoughts on the article.

Sorry Thommo, but I know you have been annoyed by a few ppl on the forum recently, but Keiran is one of the least offensive people I have ever met.

I really believe you owe him an apology.

asy :D  

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Asy, this is a perfectly polite reply
"I'm not an accountant either, but PriceWaterhouseCoopers are. They have signed me off for years with all moneys channelled through my private bank account and creadit cards. I have a biz, an investment property and a share portfolio, all in joint names but not a company or trust in sight. It works for me.

T"

This was quite a "personal" and (I thought) clear reply which dismissed his problems. It appears Keiran thought I was talking ****. I returned the favour.

T  

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Hi

Without reading the article, I would say that it is a timely reminder to all of us to think before we take action and to document our plans.

Having said that, if money is borrowed to fund an investment then the interest should be tax deductible. However, the use of those funds can then sully the tax deductability if there are delays in the process, or, if used inappropriately before the investment.

Keep things simple is a wonderful rule.

Dale  

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I do exactly what Thommo does. Business/borrowed funds through cheque account. My accountant has had no problems with it at all. If I put a deposit on a house the money is simply transferred and the cheque written. I think as long as they can see the paper trail it's ok. Maybe that person mentioned in the article had transferred all of the loan money to his savings account and left it there for other purposes. Lets say he sat it in his mortgage on his ppor for awhile and drew the money out later to buy an investment property or shares.I don't know for sure but the tax office probably wouldn't allow something like that. Just my opinion.

Househunter  

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I think it demonstrates why it's important to keep investment & personal accounts separate.....including credit cards! (the subject of an earlier discussion).

Cheers,

Aceyducey  

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The article in question is by Julia Hartman of bantacs accountants and refers to a recent AAT case - Domjan and Commissioner of Taxation 2004. It looks like it has serious ramifications for anyone who channels borrowed funds through a personal cheque account as opposed to using a bank cheque.

I would be interested if anyone like Dale etc has heard of this case and if it affects their thinking at all.

Hope this helps.

Laurie  

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Back online again. Bloody hell - I can't believe how a simple post can be intepreted so incorrectly (I will have to be more careful in future). All I was trying to do was to share some findings with fellow Forum members that I thought they should be aware of.

As I stated in my original post, "I always try to keep business monies separate from investment monies - SMSF, Hybrid trust, etc and both separate from personal monies - means more bank accounts, more in bank fees, multiple books set up in MYOB, etc but does makes tracking of monies easier". So I don't believe I have this issue - I was guessing that some Forum members may mix personal and investment monies so I was trying to make them aware of the issue.

As I also stated in my original post "I would appreciate any input from our "resident accountants" such as NickM or DaleGG as they may have more knowledge of this particular case. Comments from other Forum members would also be welcomed." I was attempting to start a discussion on the issue as I was guessing that Forum members would have differing opinions.

Thommo said:
You have two options Kieran, accept the free advice you ask for or pay for professional advice. At the risk stating the bleeding obvious, Ask a professional!Click to expand...
Thommo, I wasn't after "free advice" - I pay my two accounting firms to give me that. There is a lot of great information of this Forum but I would not consider any of it advice. As I stated above, I was after opinions and trying to start some discussion on this issue.

Thommo said:
He was disputing an opinion he asked for free when he should have asked a professional in the first place.

He asked for our thoughts and when I told him what I've been doing for a quarter of a century he thought i was wrong and refered me to a rag I don't read.Click to expand...
Thommo, none of this is true. I was not disputing your opinion - I was suggesting that you read the article if you had it handy (as I didn't have the article near me - refer my original post) If you did read it, I would have been very interested in your opinion. I was not thinking you were wrong.

Thommo said:
This was quite a "personal" and (I thought) clear reply which dismissed his problems. It appears Keiran thought I was talking ****. I returned the favour.Click to expand...
Thommo, this was not true. I did not think you were talking ****. I am sorry that you read my post that way.

lauries said:
The article in question is by Julia Hartman of bantacs accountants and refers to a recent AAT case - Domjan and Commissioner of Taxation 2004. It looks like it has serious ramifications for anyone who channels borrowed funds through a personal cheque account as opposed to using a bank cheque.

I would be interested if anyone like Dale etc has heard of this case and if it affects their thinking at all.Click to expand...
I would like to get this thread back to the topic at hand - after all, that is why I created the thread. I am prepared to post the whole article on the Forum if members would like me to. As stated by lauries, the article was written by Julia Hartman - the article states that she is a registered tax agent and a certified praticing accountant. So, I am guessing that the topic is not a pile of bull****.

Are there any other thoughts on this topic?  

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I believe the Julia Hartman who writes for the Sunday Mail is a member of Somersoft.

http://www.somersoft.com/forums/member.php?u=3634

Hopefully she might be able to shed some light directly on this potentially troubling ruling.

Regards  

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kierank

Not sure if this helps as I have not read the whole doc yet.


http://www.austlii.edu.au/cgi-bin/disp.pl/au/cases/cth/aat/2004/815.html?query=^+domjan  

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Hi all,

Thanks for the link Dwyer.

From a quick read my interpretation is that the Domjam's placed "other" monies into the redwraw account. Then later withdrew those funds.

The Tax commissioners view is that the investment loans were paid down and new loans for private purposes were created.(ie the redraw).

Maybe this sums it up from the ruling,

". I reject entirely Mrs Domjan's contention that the amounts available to her in the redraw are her private funds sitting to her credit in that facility. I agree with the Commissioner that the terms of the loan contract and the entries in her loan account directly contradict that assertion. The bank does not pay her interest for amounts which she says are funds standing to her credit. Rather the repayments reduce the loan balance outstanding and redraws increase the outstanding balance. The funds repaid do not remain the property of the debtor once they have been applied to reduce the liability. Instead they become the property of the creditor to whom they are paid.

32. For these reasons I agree with the Commissioner that an amount redrawn from this type of loan facility constitutes a new borrowing of funds. It is therefore necessary to consider the use to which those borrowed funds were put
."



Perhaps using an offset account instead would have stopped the issue from arising in the first place as there is no paydown of the original loan.

bye  

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Thanks for the link dwyerfam. I believe the Sunday Mail article was focusing on the following from the AAT ruling:


44. The Commissioner relies on this authority to submit that once an amount of money is deposited into an account that already contains funds the account becomes a mixed pool of funds and it is not possible to determine the source of each withdrawal. It is impossible to determine whether the funds used to pay an otherwise deductible expense are sourced from the monies at interest or whether the funds used are sourced from Mrs Domjan 's own monies.
45. It is further contended that once the funds that Mrs Domjan has drawn down were commingled with other funds in the cheque/savings and Visa accounts the essential nexus was lost and it became impossible to say whether any particular part of the interest paid on the loan facility related to income producing expenditure.
46. I accept the Commissioner's submissions. Where the funds have been intermingled it is impossible to determine the use to which they have been put. In other words the purpose of the borrowing cannot be ascertained. It cannot be said that the expenditure – that is the payment of interest – has been incurred in the course of gaining or producing assessable income (Federal Commissioner of Taxation v Payne (1994) 28 ATR 58).


As stated, this highlights the need to keep private and investment monies separate. Although this is not always easy, especially if for example you do not have a separate investment cheque account.

I would be interested if Dale or others have further thoughts.

Laurie  

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Hi All

Your post is very valuable as my advice has been to always keep accounts seperate and pay for items from the correct account. Why whilst the ATO can elect to accept the transaction iscan also elect not to. Why run that risk?

So for example:

Buying Shares for Family Trust you should transfer funds in to the Family Trust Account and pay via the Family Trust. That way you have loaned the Family Trust the funds it has to pay back. Not bought the shares in your personal name.

Also:

Deposit for IP best via Deposit Bond that way it is 100% debt. If you use 10% of personal funds as deposit and seek to reimburse later the ATO can say only 90% can be NG because only 90% is debt.

Again, the best system keep it simple and keep it clear.

Peter 147  

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kierank/All,

This is a newletter put out by Julia Hartman of bantacs accountants and refers to a recent AAT case - Domjan and Commissioner of Taxation 2004.

Hope this helps.

(Sorry, could not attach it : File Too Large. Limit for this filetype is 100.0 KB. Your file is 119.8 KB.

Go to the website and read/download it www.bantacs.com.au
)

BTW, that AAT appeal doc was 47 pages long! :mad: Apart from the current matter this post is about, it also has some useful info re the issue of "repairs or replacement" arugment. So, read up if you wanta be a bit more "educated".

Danny D.  

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Danny,

Thanks for the link - I will give it a good read.

KieranK  

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