Advice on current situation.

But would this unmix the loan from a tax perspective?

 

Not sure what you don't understand?

Debt Recycling concept itself?

Say you had $200,000 cash in the bank against main residence. Main residence owned by yourself with a spouse who is not on title.

You take $200,000 and pay down the main residence loan, then reborrow it and lend it to your spouse who buys a $200,000 property using your loan.

Four main benefits
a) decrease in non-deductible interest
b) spouse has a deductible loan
c) later when serviceability improves spouse refinances your loan with a bank and the interest can still be deductible, if set up right.
d) the family has another investment property

 

If the funds are still sitting in the loan, unused, not likely to be a tax issue. If they've been transferred into an offset account, he could pay them back into the new split and depending on lender either leave them there undrawn or redraw them into a new offset (not ideal of course but okay.)

 

care has to be taken as this is potentially a mixed purpose loan. If the funds haven't been drawn it could be acceptable to split without causing further mixing, but if the funds have been drawn then the ATO only allows an exception for refinancing.

Get some tax advice before doing.

 

If the funds have been paid out (such as into an offset) this would create further mixing. I recommend not splitting the loan by asking the current lender to create a new split.

 

The loan is a PPOR loan, right?

Not deductible anyway.

Split the mixed loan.

Repay the full amount of the top-up back into the split which is a LOC. This makes it a brand new unmixed loan. No need to refi.

**Edit - Ah - it's for when he wants to turn it into an IP down the track. I get ya.

 

With a salary of $140,000 and the claim that you 'do not live an expensive lifestyle', you could theoretically own your home outright in 3-4 years... I suggest you do live an expensive lifestyle in comparison to someone who earns say $50,000 with a similar family membership to yours... if you lived like they did, you'd have $90,000 'spare' before-tax income you could put straight into the loan. What you consider as being 'normal' fiscal behavior is probably not.

My brother is in a similar income bracket to you - somewhere between $140,000 - $180,000 and lives in a similarly valued home as yours, with a similar car value... it's uncanny... yet I earn less and have substantially more wealth (own more expensive home outright, paid cash for car etc.). He could overtake me in a year or 2 if he didn't hemorrhage money... and I think of the possibilities if I earned what he did...

 

Thanks all.

Glad I checked before redrawing and using elsewhere.

 

So just to revisit this thread, It's now 12 months down the track and the car loan was paid off completely, i'm back to $15,000 in the offset account and still have the $15,000 top-up. (still untouched) in the home loan account.
Me and the wife have made a commitment to continue to save for 12 months for a new PPOR, converting current PPOR to an IP.

From my understanding, my best bet would be to split my current home loan into something like A$30k - B$30k - C$190k.
This would allow me to access the $15k topup for a new loan without mixing, provided the topup was part of loan A or B and was paid in full?

 

No bites, is it worth me starting a new thread?

Ainsley