Redraw from IP loan

Hi all,

I have an IP loan worth $625k with $25k available for redraw. I'm in the process of refinancing to another bank and want to the new bank to give me a loan of $650k rather than $625k. If I redraw the $25k with the old bank and leave the $25k in the offset account linked to the loan, will there be any tax deductibility issue?

Cheers

 

Yes

 

Just to have on hand for investment when the opportunity comes...

I'm guessing this is not deductible

 

Use for a deductible purpose? Not anticipation. However if its advanced to a offset is interest incurred? But later if the offset is tainted it could affect deductibility

 

The $25k will sit in an offset account so no interest will be incurred initially against the $25k redrawn. My plan is to use it to invest (e.g. in shares), but as to when I actually invest, it really depends on when the opportunity presents itself. So to answer your question, no interest will be incurred as the money will be in the offset account, and when the $25k is used, it will be used for investment, so does that mean the interest incurred from that time will be deductible?

 

No. The proportion that is deductible could be affected by other transactions in the offset prior to the use to invest. It could be confusing and the ATO could cancel a deduction.

eg You have $25K borrowed in the offset. Then deposit $10K (private money parked for a few weeks), Draw the $10K back out. How much of the $25K was borrowed money ?

 

TH

Thanks, Paul. I guess it's best not to do this as it could get messy.

 

why not just split the loan when refinancing and have $25k interest only and fully offset it. keep it for emergancies.

 

Thanks, Terry.