Existing PPOR loan to IP for claiming tax deductions

Hi all

I hope I can describe my situation clearly. If anything is not clear I'm happy to explain and really appreciate your helpful advice.

Due to some personal difficulties where I was living, I recently moved out of my unit and started renting. In the meantime I have been making some repairs to my unit and intend to rent it out shortly.

I have two home loans with CBA for my mortgage on the unit. One is a larger loan and one is a smaller loan, together totaling around 260k. They are both variable though I'm considering fixing the large loan soon. Both loans have redraw facilities (more about that in a min). As I understand, when I rent out the unit these loans will be considered investment loans.

Now my question relates to claiming tax deductions on the interest of these loans and herein is part of my dilemma. Over the past couple of months I have had to make some redraws from the redraw facility to make some payments. I was moving this money from the loan account to my savings account in the process of making those payments. The first amount of 2k I redrawn was during P&I from one of the loans. Both loans were then made IO seven days after I made this 2k withdrawal and no P&I repayments on the loans were made during this period. The other amounts were redrawn after IO was arranged.

I've been reading a lot on the forums about loan contamination. I'm just wondering what I can do here? At the moment I am not looking to claim tax deductions on the interest of my loans as my property isn't rented or available to rent. But once it is rented or advertised for available to rent then I would be looking at what interest I can claim.

I've read advise to set up a separate loan account for the new loans created from redraws but at this stage I haven't discussed this with my bank and I'm not sure if I will be allowed to do this. I'm not concerned with trying to make claims on the interest of the amounts I have redrawn but what about the loan balances prior to making any of these withdrawals?

Is it possible to take the loan balance before any of these redraws were made for calculating interest and then use that for claiming tax deductions?

All this information is clearly shown on my bank statements as it has only occurred during a short couple of months as I had never touched the redraw prior to Feb this year.

Any advice much appreciated.
Steve

 

It's a mixed purpose loan possibly but nothing to worry about. If just $2500 involved that is less than 1% of the loan balance so you could probably claim 99% of the interest each month.

 

Thanks Terry. It's actually about 11k in total which is a little over 4% of the loan balance. So even claiming 95% of the interest would be more than fine with me.

Is it difficult to calculate the amount of deductible interest from a mixed purpose loan? Would a loan apportionment calculator such as the one below be helpful?

Loan Apportionment Calculator | BAN TACS

 

It should be easy to work out. Just start at the first transaction and work it out one at a time.

I don't know anything about that calc but it may make it easier.