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Refinance and Equity Release, tax deductability

Discussion in 'Property Finance' started by DareDevil, 21st Apr, 2016.

  1. DareDevil

    DareDevil Active Member

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    Hi All

    I am planning to buy a new PPOR and make my current PPOR an investment, Assuming i have 400k loan on the current PPOR if I refinance it with a different bank for say 500k and release the equity, then later make the home an investment.
    Can i claim interest on whole 500k tax deductable, or do I have to make the 100k a different loan and only claim interest on 400k.
     
  2. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Only the original $400k was used for the purchase of the initial PPOR (now investment) property. The additional $100k would only be tax deductible if you use it for a deductible purpose.

    It would be a very good idea to implement this via a split loan so you can easily differentiate what the different monies are used for.
     
  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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  4. DareDevil

    DareDevil Active Member

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    Thanks guys, this makes perfect sense.
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Tax law is logical when you think about it.
     
  6. MDD

    MDD Member

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    Guys, need some education here..
    case study:
    PPOR Home loan is $500000 ... $100000 is in Redraw after refinancing... plus, $50000 in offset...

    now, if i would like to use my redraw & offset money into investment/asset generation..what sort of loan structure i should develop to maximise the tax deduction.. do i have to create another loan account and transfer redraw/offset money into it? and if i do that, does it offset my PPOR loan?
    Thanks in advance
     
  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    If you use redraw you will have a mixed purpose loan. You need to restructure.

    Terryw’s Ideal Loan Structure
     
  8. MDD

    MDD Member

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  9. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    You would definitely benefit from specific advice here, as the offset money (assuming it's your own savings) can also be used in a more tax-effective manner than simply using it as is. You don't want to use cash for investments when you've got non-deductible debt.
     
    chylld likes this.