Redraw from PPOR offset account to pay for IP - is interest deductible?

Hey guys,

I have signed a construction contract for an IP with progress payments. Something has now surfaced with my construction loan, and the bank may not be able to fund the progress payments, but instead fund the lump sump once construction has completed. This means I will need to fund the progress payments from my own fund.

Fortunately we do have sufficient fund in the offset account of our PPOR to fund the progress payments. What I was wondering is, the interest that I will be incurring by drawing from the PPOR offset account, will this be deductible?

Thanks heaps guys!
Bernado

 

Not deductible because the interest relates to the PPOR loan.

You could pay this loan down and reborrow to make it deductible.

but seek tax advice as many issues

 

Thanks @Terry_w.

So if I understand it correctly, you mean take the money out of the PPOR offset, then use that money to pay down the PPOR loan. Then, use the equity against PPOR to borrow another loan to pay for the IP payments? Is that what you meant? (sorry I'm quite a newbie).

 

Yes, but depending on the timing you may have to redraw from the same loan.

Have a look at my tax tips as I have covered this before