Equity in home for investment purposes

Hello, just wondering if we are using the equity in our own home to purchase our investment properties, are we able to claim via the ATO the interest payable on the loan?

 

Are you asking about borrowing to invest?
Security is largely irrelevant it is the use the borrowed funds are put to that count

 

You can claim the interest on the component of the loan that is being used to fund the investment. You cannot claim interest on the original amount that is against your PPoR.

At least I think that's how it works, an accountant will be along shortly to confirm.

 

We used the equity in our house to fund the purchase of the investment properties, so the loan on our home is Interest only. Its the interest-only component that I've been told that we can claim a tax rebate on.

 

Thanks well Ive been told the complete opposite with my Tax Agent and thats what I would like clarified. As Im now getting conflicting opinions.

 

Either you have mixed up what your tax agent has said or it's time for a new tax agent.

 

No I definitely havent mixed it up because Ive asked the same question for the last couple of years. Yes, I agree time for new tax agent. So would I able to put in an additional claim for the unclaimed portion?

 

What do you think your accountant told you?

 

Because the house is our principal home, we are unable to claim the equity loan against it.

 

The confusion might be with which part is tax deductible.

Eg lets say you have a $1mil home
And lets say you have a $500k homeloan
And lets say you get an equity loan of $300k added to it (hopefully as a separate account) to go use to invest (preferably use as deposit and get separate loan for the remainder of the investment property).

In this scenario, interest on the $500k homeloan is not deductible. Interest on the $300k portion is. It makes no difference whether either are P&I or IO. It doesnt matter than the $300k is on your own home, because its the purpose of the funds that matter.

 

Thanks DT, thats what I thought it was. So is it possible to put an additional claim on the tax office for the last couple of years which hasnt been claimed?

 

Yes, submit an amendment.

Please tell me you did it as a separate account?

 

Yes that is true.

But you may be able to claim the interest against. The investment property

 

Is the equity in a separate loan split? Or all lumped into one loan?

Either way, if it's IO it should be fairly easy to work it out and split it off.

 

its a split loan

 

Haha no way - split loan, funds used for investment and tax agent saying not deductible as secured against owner occ.

GOLD!

 

See Tax Tip 22: Security for a loan does not determine Deductibility of Interest

 

You’d be surprised how much questionable advice I see from people actually licenced to give it.

 

Yes I've had one this week with client wanting to do something that I questioned the deductible of and suggested they speak with an accountant.
I was pretty gob smacked when they told me that's who told them to do it, fair to say they got a second opinion.

But simple destructibility like that, surely that's like tax 101.

 

I know. One of my clients has nearly a whole portfolio of non-claimable loans due to terrible advice. He didn't even know until I started asking questions about the purposes of his loans, which were all crossed as well. Poor guy.