Redraw from PPOR

Discussion in 'Investment Strategy' started by Simone, 26th Oct, 2016.

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  1. Simone

    Simone Member

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    Hi,
    I was hoping to get some advice from the experts here about my situation. I recently refinanced our PPOR and withdrew some equity. The equity was intended to purchase an IP but circumstances changed and my partner had to use the money for his business. Now, we didn't draw any loan agreement between us (so not officially spousal loan) as my accountant said that I should not increase my income if I am already on somewhat high tax bracket.

    Now, if my husband pays back the money to me, can I pay it into my PPOR loan and redraw again in a separate account for investment? I want to make the equity portion of the PPOR loan and the IP loan as tax deductible. Any ideas on how to achieve this?

    Appreciate your help.
     
  2. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Ask @Terry_w - he loves this stuff :)

    Cheers

    Jamie
     
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  3. Terry_w

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

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    Many issues here.

    Mixed purpose loan on the property unless you split it.

    Your accountant's comment doesn't make sense - you have made a loan under oral agreement. But what about the interest on the loan? Why not document your loan and oncharge the interest to the spouse and get him to claim the interest.


    If you pay back money into the loan it will be even more mixed. But If your main residence will never become an investment - it may not matter about the loan being mixed. But if you are charging spouse interest and claiming interest it should be split.

    ps love this stuff!
     
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  4. Colin Rice

    Colin Rice Mortgage Broker Business Member

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    I love reading the responses :)
     
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  5. Terry_w

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

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    I love that you love it.
     
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  6. Colin Rice

    Colin Rice Mortgage Broker Business Member

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    Admittedly some of it takes a while to sink in but when it does I can here the penny dropping.
     
  7. Simone

    Simone Member

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    Thank you @Colin Rice and @Terry_w. I am afraid the mixing bit has already happened. This PPOR will be converted to IP in a couple of years. I knew something about that advice from the Accountant was wrong but sadly, I was time poor to get proper advice.

    I understand that the previous equity loan is not clean anymore and I can't get tax benefits on it.If my husband pays me back, can I add it to my loan and ask the bank to create a new split loan for future investments? Will the redrawn amount in a split loan be tax deductible?
     
  8. Terry_w

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

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    I think you should split the loan before paying the money back into it. Then when your husband repays you pay off your split (making sure it doesn't close). Then you can later redraw it and it will be new borrowings and deductible against what it is invested in.

    I think I have a tax tip on unmixing a mixed loan.
     
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  9. Simone

    Simone Member

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    Thank you heaps.
     
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  10. Scott No Mates

    Scott No Mates Well-Known Member

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    Secret admirers? ;)
     
  11. Colin Rice

    Colin Rice Mortgage Broker Business Member

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    Not anymore ;)
     
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  12. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

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    Is the loan interest only?

    If it is, sorting this out will be a piece of cake.

    If it's P&I it will be slightly more complex but most likely still relatively easy. If you've been drawing in and out of the loan it gets more complex, but if hubby will be completely repaying the loan it's still not the end of the world.

    Which lender are you with?
     
  13. dabbler

    dabbler Well-Known Member

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    virtual group hug everyone, I love that you all love each other....lol


    To the OP, do not give up, I think you can fix a lot of this and at least not do more self harm, Terry has written a lot, do not pay any more money into the loan, pay it to an offset or make a split now.

    At the end of the day, if you do pay it down and it becomes an IP, means you own more and contributing a bit more, won't be the end of the world especially if not on the highest tax rate.

    PS you could also look to sell to one or the other to re borrow if owned 50/50 now.
     
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  14. Terry_w

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

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  15. Simone

    Simone Member

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    Love the camaraderie on this forum :D

    Appreciate all the helpful responses. We do not own jointly currently. He is self employed and adds too much complexity ;)

     

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