pcnParticipant@pcnJoin Date: 2013Post Count: 13
I have a $30k saving sitting in my offset account to my PPOR home loan. I want to pay down my PPOR home loan so to in crease my equity in my PPOR. Then I want access this equity to purchase my IP. Will this $30k tax deductable?
CheaBigCubezParticipant@bigcubezJoin Date: 2012Post Count: 48
Yes it will be deductible. However once you use it to pay down your PPOR loan, accessing the whole $30K will depend on the LVR on your PPOR.Jamie MooreParticipant@jamie-mJoin Date: 2010Post Count: 5,069
Yep, should be. You'll need to set it up as a separate loan though so you can determine your non tax deductible debt from your tax deductible debt.
JamieTerrywParticipant@terrywJoin Date: 2001Post Count: 16,190
The interest on this will only be deductible if:
1. It is used for investment or business purposes, and
2. If it is properly transacted – you could lose deductibility if it passes through a savings account or cheque account.Paul B.Member@paul-b.Join Date: 2013Post Count: 70
I apologise for my ignorance but why wouldn't you just use the money straight from your offset account?TerrywParticipant@terrywJoin Date: 2001Post Count: 16,190Paul B. wrote:I apologise for my ignorance but why wouldn't you just use the money straight from your offset account?
Because the interst on the home loan would increase and this would not be deducitble.Jamie MooreParticipant@jamie-mJoin Date: 2010Post Count: 5,069
Like Terry said, doing it that way is going to increase your non-tax deductible debt whilst reducing your tax deductible debt. Not a good outcome.
Think of it this way.
You have a $100k owner occupied loan.
You have $30k sitting in the offset account.
So you're paying interest on $70k.
If you took that cash out to fund an IP, you'll start paying interest on $100k.
However, if you restructured the loans and created a $70k loan split (owner occupied debt) and a $30k loan split (the equity release for IP purposes) you'd have a $70k non-deductible debt and a $30k deductible debt.
A better outcome.
JamieRichard TaylorParticipant@qlds007Join Date: 2003Post Count: 12,018
Paul case of use it and lose it.
Structured correctly you can have your cake and eat it.
Yours in FinancepcnParticipant@pcnJoin Date: 2013Post Count: 13
Thank you all for your comment. It's very helpful.
CheaPaul B.Member@paul-b.Join Date: 2013Post Count: 70
This structuring of finance stuff is addictive! Thanks for the help.Richard TaylorParticipant@qlds007Join Date: 2003Post Count: 12,018
So true Paul and it is where most clients come unstuck.
Had a forum member from Sydney ring me yesterday who had sold her IP and her Bank had told her to pay back the net sale proceeds straight into her PPOR loan.
They told her when she needed the funds on the next IP just go ahead and redraw it………
On a $300K redraw that has just lost you the best part of $18K interest deduction per annum.
No point in going back to your Banker when the Accountant / ATO break the news to you as they will have moved onto to another Branch or shifted Departments.
Yours in Finance