Loan Account Arrangement

haoba

Need some expert advise to see which option is better.

Property A --- Loan Account=LA --- Offset Account=OA
Property B --- Loan Account=LB --- Offset Account=OB
Property C --- Loan Account=LC --- Offset Account=OC

Option 1:
Interest for LA debit from OA, Rental income from A go into OA, Normal Salary go into OA.
Interest for LB debit from OB, Rental income from B go into OB
Interest for LC debit from OC, Rental income from C go into OC

This option looks clean, but the problem is the Rental income from OB/OC can't cover the their interests as those are negative gearing property. So OB/OC won't have enough money to pay the interest.

Option 2:
Interest for LA debit from OA, Rental income from A go into OA, Normal Salary go into OA.
Interest for LB debit from OA, Rental income from B go into OA
Interest for LC debit from OA, Rental income from C go into OA

This option doesn't have the problem Option 1 has since OA always has enough money to pay the interest, but it doesn't look as clean.

VagrantJack

I am a business service accountant. In my opinion, neither arrangements would cause a tax problem. The difference in two option is how the loan is repaid. You only need to worry about if you have enough cash flow to meet your loan repayments. When it comes to tax time, only interest on loan is deductible and that is what matters, not how the loan is repaid.

kidz821

as long as the accounts are under your name

JohnnySu

You can deposit the rent wherever you like. As long as you are declaring the income and expenses correctly on your tax return you are fine.