Is equity from PPOR used to buy investment property deductible?

Gday all,

I have got mixed reviews from people on the above subject. I am looking to remove about $120k of equity from my PPOR and put it as a deposit for an IP.

I have been advised by doing so the 120k is not deductible?

Can I get some more insights on the above. Appreciate any guidance.

Thanks
Melv

 

Equity is not deductible but the interest charged on that equity is.

Whether you use $120k from your pocket or slice 20% off your yard, you aren't able to claim that amount as it is cash/cash equivalent/capital (it's your money). The difference being that using equity is borrowed funds the interest is deductible whereas if you used cash, there's no interest.

 

It usually is - just make sure you create a new loan split to reflect the deductible portion.

 

Who advise you this?

You can't borrow equity. Equity is the difference between valuation and debt.

You can borrow money and interest on money borrowed to invest in income producing assets would generally be deductible under s8-1 ITAA97.

But it may not be deductible if you bugger it up - making borrowed money take detours for example.

 

@Terry_w - love your current tag, living it up in the Sun for January?

 

I tend to find that people who ask questions like that also have been told many other incorrect things. Its a sign that having a tax adviser may help. Friends invariably have no idea - even some who own IPs

 

it was probably another rogue hairdresser - or mortgage broker.

 

Thanks guys, much appreciated.

 

I am reliant on my trusty uber driver, Artur. He picks up property lawyers and accountants all the time & they teach him things.

 

Does he have a cold or persistent cough?

 

Anything that Arfur was involved with was always a little questionable.

 

Picks up in 'is motor - eh Terry.