Debt Recycling Investment Property

I think you might be not grasping the concept.

If you had say $100,000 in debt to buy a property you could deduct the interest on this while it is rented.
Say you wanted to buy $20,000 worth of income paying shares.

You could either
a) pay down the property loan by $20,000 split the loan and redraw $20,000 to invest
or
b) use $20,000 directly to invest in shares

In both cases you would have the same tax outcome. interest on $100,000 would be deductible.

You would only want to do option a) if
- you might be moving into the property,
- the shares and the property will be owned by different persons, or
- for estate planning purposes.

 

I see, thank you very much!

 

With the whole debt recycling strategy, assuming you pay down, split and redraw $20k from your PPOR home loan to invest into shares, what happens to the tax deductibility of the $20k split loan if you were to sell $5k of that $20k in shares?

Also, if you were to split out $100k from your PPOR home loan and redraw to pay down $100k of your investment home loan, would that split be tax deductible?

 

Strategy: Borrow Against the Main Residence for an Investment Loan (Shuffling Loans Around)

Tax Tip 55: An Exception to the rule about splitting before Repaying a Mixed Loan

read these and then get some specialist tax advice.

 

Debt recycling at its core is a process to convert non-deductible debt into tax deductible debt.

If you don't have have any non-deductible debt, there's nothing to apply the process to. A discussion about debt recycling is not relevant to the circumstances.

You can still borrow to acquire investments, but there's no debt recycling involved in this process and there is no need for it because the debt is probably going to tax deductible anyway.