I have IP1 and IP2 with their own interest only, Line of Credit loans. I have substantially paid them down which leaves me with this credit available on the LOC. I want to now renovate my PPOR and want to draw on the accelerated payments into the LOC. is there any issue with interest deductions given that these are interest only loans with no obligation to pay down principal?
Hi Prop
Firstly welcome to the forum and I hope you enjoy your time with us.
Think you might have a small problem here my friend.
Personally i would never recommend a LOC to a client if this was the loan on the investment property as one issue is that when you redraw on the LOC the interest is only tax deductible where it is used for investment purposes.
From what you have described the interest is clearly not Tax deductible and YES you will have a problem.
Maybe a way around it but in saying this I would need more information first to make further comments.
Richard Taylor | Australia's leading private lender
Hi
You hare repaid loans and would need to withdraw (=borrow) to fund your personal expenses. Therefore the interest on any new withdrawal would not be deductible.
This is why it is good to never pay down any loans, but to put the money in a 100% offset account. By putting hte money in the offset it will still be available for these sorts of things and it won't affect the deductibility of loans when you use the money.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
You must be logged in to reply to this topic. If you don't have an account, you can register here.
