Debt recycling

Hi all, newbie in debt recycling here. Just wanna clarify the actual operation in order to achieve debt recycling.

My situation
Home loan non-deductible 800k
Shares approx 410k

Question: I'd like to split the 800k home loan to 390k non-deductible and 410k for investment purpose, since the shares have already bought, do I need to ...
1. Liquidate all 410k shares
2. Pay off 410k mortgage / or refinance only 390k home loan
3. Apply for 410k top up/equity loan
4. Buy back the same shares value at 410k (have price difference risk)

Or I can just split the loan into 390k and 410k and declare that 410k is for investment purposes so that it can becomes tax deductible?

To make it more complicated.. can the top up loan for investment in joint name but the actual investment is in single name? Can still have all interest deductible or only half of them due to the loan is joint name?

Thanks

 

did u borrow to acquire the shares?

 

Unfortunately not as I just learnt this recently.

 

well the interest on the loan won't be deductible then as you probably realise.

You could sell the shares and reborrow to buy them back but you need tax advice on whether the ATO will apply Part IVA to deny the deduction using the anti-avoidance provisions as this is a scheme with the sole or dominant purpose of claiming a deduction.

 

Oh thanks.

So is it that I'd better use the fund to buy another kind of asset (e.g. IP) in order to claim the interest legitimately?

 

I cannot answer that. If you debt recycled to buy another asset you wouldn't have to worry about the tax issues with Part IVA though.

 

We’re considering starting debt recycling and having this managed by professionals for us.

I’d be interested to hear from anybody who is currently actively pursuing the strategy. Cheers

 

None. I have been looking at your company Rolf.

 

Rolf's the man for active DR strategy

 

Just looking into this again.

Our PPoR is currently fixed for 4 more years at 1.98%. Offset on IP is full and the residual is invested in shares.

Given current interest rates, could it be counterproductive to break the fixed rate period on our PPoR and take on a new loan with a much higher interest rate?

Thanks in advance all.

 

Thanks Rolf. Assuming not ideal this way though?

I’ll be back in touch with you guys next week.

 

If you can pay $x into a fixed loan, there would be a partial break cost - which would be nil or close to nil in your situation. You then have equity which you could borrow against under a new split