Loan Tax Deductibility - Excess Funds

Discussion in 'Loans & Mortgage Brokers' started by Frosty123, 27th Jan, 2022.

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  1. Frosty123

    Frosty123 Well-Known Member

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    Hi all,

    I took out a loan (with CUA) using the equity in my PPOR to purchase an IP several years back.
    The balance of the IP purchase was taken out with another lender (Bendigo Bank).

    The IP has since increased quite a lot, and I'm now able to get Bendigo Bank to pay out my loan from CUA, and roll the whole lot into a new loan. Meaning the entire loan will be secured against the IP.

    What I'm trying to understand, is that the CUA loan to payout is currently $96k or so.
    I don't know exactly what it'll be on the day of settlement, so I've just requested a $100k loan to pay out the CUA one, and the balance to be put into an offset account against the new Bendigo Bank loan.

    I'm unclear if this will compromise my ability to claim all the interest on tax. Since the extra $4k or whatever it ends up being is not technically being used for IP purposes.

    This is obviously a common thing to do...wondering how it is usually handled

    Thanks!
     
  2. Tony Xia

    Tony Xia Structured Loan Advisor Business Member

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    Just pay back what you dont need or whatever surplus funds you have .
     
  3. Frosty123

    Frosty123 Well-Known Member

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    So if there are surplus funds of say $6k deposited into the new offset account, just pay that into the loan straight away.

    Makes sense. Thanks :)
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Technically it will be a mixed loan. Why not segregate the excess funds and use it for property expenses
     
    Paul@PAS likes this.
  5. AM0_Dexter

    AM0_Dexter Active Member

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    If paid back the surplus funds (added into new, empty offset) on the same day as settlement for a PI loan refinance, will there therefore be no interest apportioned to this “new borrowing” and retain deductibility of the original loan?

    I don’t like the idea of holding the funds for investment property expenses. It’s more administration and can easily make mistakes transferring into wrong accounts later.
     
  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    You would need a private ruling to know the answer to that. Possibly
     

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