Im currently waiting on a refinance on my property to draw down the equity which I was hoping to use for a deposit on another IP. The additional funds from the refinance may not be available in time for the deposit so I was considering using some of my offset account and borrowing some money from someone else for a week or so until the refinance gets processed. Once the additional funds are available, I could give back the money to the person who I borrowed from and replace the money taken from my offset account. Would the interest from the refinance still be tax deductible and considered as used for investment purposes?
Thanks in advance.
Scott No MatesParticipant@scott-no-matesJoin Date: 2005Post Count: 3,856
Provided that the funds are being used for an investment property/shares there shouldn't be an issue – you are refinancing in a very short timeframe, nothing wrong with that.
Yep the funds would be used for investment purposed, but whe I get the funds from the laon extension they will be going to someone else and back to my offset account to replace the money I borrowed from someone else and my offset account to pay for the deposit. Is this still classified as investment purposes?TerrywParticipant@terrywJoin Date: 2001Post Count: 16,213
If you use your own funds, then the money taken from the offset account cannot be replaced with money borrowed with the tax being deductible. You would be paying cash for an investment and then borrowing money for something you already own.
If there was a trust involved, you could lend your money to your trust and then refinance this amount from your other loan, but you cannot lend money to yourself – maybe you could have someone else 'lend' you the money.
If you are borrowing from someone else, then you would be just refinancing this loan with the new one where you are releasing equity.
Becareful with borrowing money an then temporarily depositing it into a savings account mixed with other money (eg to write a cheque) as the chain will be broken and you will not be able to claim the deduction.v8ghiaMember@v8ghiaJoin Date: 2005Post Count: 871
It gets technical, but as a result of so many people trying to rort the system, technically no. (ie see the above comments) However, remember you would need to be audited for this to come to light, and if you left a legitimate paper trail (ie get your spouse to lend you the money, or put someting inwriting/document it all including the loan that was 'late'. via detailed notes etc ) and could genuinely prove this to be what you did with documentation, you would have to catch someone on a bad day for them to 'ping you' on this.
Then again, your choice in the end. All the best
Thanks for all the input guys. I sent through the paperwork via express mail today so hopefully the bank processes the top up in time so I dont have to worry about this. If they dont then I may have to borrow all the funds from someone else as suggested and then repay them once the top up is processed to ensure that it is all tax deductible.