Maintaining deductiblity when recycling deposit splits?

Discussion in 'Accounting & Tax' started by Propagate, 30th Jul, 2015.

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  1. Propagate

    Propagate Well-Known Member

    18th Jun, 2015
    With all the recent changes to IP loans I'm just re-assessing where we stand with ours and have a quick query.

    IP has deposit loan secured against PPOR ($50k)
    IP has balance of loan secured against itself

    Late last year we tried to release equity from IP as it had increased in value, the plan being to "pay back" the deposit loan on the PPOR with the equity release so the IP was stand-alone.

    Turns out, the bank changed their criteria and would only give us 90% not 95%, so we left the equity release ($25k) as an un-drawn split against the IP.

    So, currency we have 3 loans across 2 houses. One is un-drawn (so no interest), the other 2 are fully deductible.

    If I draw down the $25k split and pay of 50% of the deposit loan, gibing me 3 loan drawn loans now but with a total balance exactly the same as when there were, I assume all three loans are still tax deductible? Is there any reason why, when refinancing a loan it has to pay out the loan it's replacing completely?

    I figured I may as well draw it and recylce the PPOR deposit split with as much as possible, as with the new APRA stuff going on, the chance of getting that un-dawn portion increased in the near future is negligible yet there's always a possibility they may turn around and revoke it if it sits undrawn for too long.