Redraw off investment property mortgage to pay investment property bills

Hello,

It was suggested over at investchat that I might find some advice here.

I've been trying to find some information re redrawing on the ATOs site to no avail. I have a basic mortgage on a home that was my residence until circumstances changed. I now rent the property out, and live in a rental property myself.

Some months are tough, like this month when my washing machine broke down. I want to know if I am able to redraw from my mortgage to pay bills for that investment property. Eg when my next rates bill comes, can I redraw to pay it? Can I total up expenses for one month, including real estate management fees, and redraw that? We are a single income family, but split investment income and expenses as property is in both our names.

I saw a basic accountant five years ago when we first started renting the property out, but I suspect the accountant was not a property specialist, and was not given any helpful advice at all. I now realise we should have had a property valuation carried out at the time, also. Also, someone at Centrelink unofficially told me I could claim the investment income and hubby could claim the expenses, but luckily I checked that one with the ATO as that is NOT the thing to do!

We moved out five years ago, and will not be returning, as the neighbouring house us rented by long term problem tenants.

I'd appreciate any and all advice, and understand the advice does not take the place as that provided by an accountant. Thanks, Tee.

 

Can you borrow to pay for investment expenses? Yes.
Will the interest be deductible? It depends.
Does your investment loan have money available to redraw? It would be unusual if it did, unless you had paid it down. Watch out for money taking a detour and this killing the deductibility.

See
Tax Tip 4: Borrowing to Pay investment expenses https://propertychat.com.au/community/threads/tax-tip-4-borrowing-to-pay-investment-expenses.1554/

 

We've always paid more than the minimum amount, as it was our only property loan. It's rented out for well above our minimum repayment, and we've had the property about 12 years (we lived in it for 7, it's been rented out for 5). We left it quickly, and circumstances didn't allow us to properly consider what we should be doing with expenses. The accountant we saw was only interested in rushing through our return for the first year, rather than providing any substantial advice. I can see there are a few avenues we could go down with expenses, so it is clearly time to seek proper expert advice. Thanks everyone for the information. Tee

 

If you haven't bought another ppor it may be time to move back for a while before you lose the cgt free status.

 

Great idea. This suggestion could be worth a lot of money to the OP...

 

Sorry to bring up an old thread, but I thought it best to post in an existing one instead of a new one with the same subject.

I've been through Terry's Tax Tips (great help, thanks) but can't really find any that relates to my situation.

Bought a PPOR years ago and have recently moved out and rented it.

My loan has both an offset account and a redraw facility. I have always put my earnings/savings into the offset account and never paid any extra into the loan itself. Overs the years a redraw amount has accumulated due to the interest saved from the offset account.

Now that the house is rented I would like to access this redraw amount to pay insurance, rates etc.

As long as the expenses are related to when the house is rented, or available for rent, I can pay these from the redraw amount available (rather then the offset account) and there shouldn't be a problem with creating a mixed loan or claming deductions?

Would there be any implications if I later moved back into the house? Assuming I redrew ONLY for expenses related to when the property is rented.

My loan has the ability to redraw via Bpay/bank transfer direct to others, so there would be no "detour" of money when making payments.

 

I think I covered this in a very early tax tip. Tax Tip 2 or 3.

Consider Part IVA too

 

Perhaps you could ring the lender and ask them to defer a payment until the next month if you have money available.

I found that I was slowly gaining on an investment property because i was paying repayments Fortnightly instead of Monthly and there are 26 fortnights in the year but only 12 months (if each month was spilt in half there would only be 24 payments).