Refinance and Equity Release, tax deductability

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.

 

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.

 

No you cannot.
Tax Tip 77: Redrawing Extra Repayments to Increase Deductions? Tax Tip 77: Redrawing Extra Repayments to Increase Deductions?

 

Thanks guys, this makes perfect sense.

 

Tax law is logical when you think about it.

 

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

 

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

Terryw’s Ideal Loan Structure

 

Thanks..

 

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.