Remaining borrowed amount after buying ETFs

Hi

I have equity release of $16000 for investment purposes. I transferred this amount to my Selfwealth trading account to buy ETFs.

I now have $25.20 remaining in the trading account of Selfwealth and I can't buy anymore EFT units as this amount is not enough. In the next 2-3 months, I want to invest my personal money in more ETfs and of course this requires me to transfer money to the Selfwealth trading account.

If I leave $25.20 borrowed money in the trading account this will get mixed up with my personal money. Should I first transfer back the $25.20 into investment loan before putting my personal money into the trading account?

What is the best thing to do here ?

Thanks and appreciate your inputs.

 

I could be wrong, but because you've borrowed the money and invested it into your self-wealth account, I would then think that as long as the total amount is used to buy shares then it should all remain deductible.

The cash you are injecting would arguably be better off paying down non-deductible debt and then re-borrowing against it to invest so the interest is then deductible.

 

The moment you pay cash into the account it will mix the borrowed money and you won't be able to claim the full interest on the loan. But it will be such a small amount it won't really matter. what is 25/16,000 as a percentage?

 

Does the fact its a trading account have a bearing on the money being deposited in there?

Or is it treated like any other savings account?

 

Its really just a savings account like all the others.

 

Great idea. Thank you

 

Thanks Terry. I was more of worried with the fact of mixing borrowed money with personal money. Just want to keep it as clean as possible.
Percentage wise 0.15625 if my maths is correct

 

This leads me to another question. If I pay down say $5000 into the loan and then redraw will the interest on this $5000 deductible ?

I will then have loans 1) $16000 original loan 2) $5000 redrawn loan

 

You will need to split the loan, there are minimums to spliting loan amounts, and it will depend on your package and bank whether you can split more.

There is also potentially a Line of Credit option.

I suggest searching the forum and @Terry_w 's posts in regards to debt recycling.

 

Terry, if he has $25 investment loan money remaining in the account and puts in another $975 of personal money ($1000 total) and then somehow buys income producing shares for exactly $1000 (account is now completely empty at $0), could it be argued the full $16000 was used to purchase appropriate assets for deducting the full amount?

I present this situation as it could happen in Commsec where you have 2 days notification of the exact transaction amount and so you are able to top up the exact amount to clear the balance down to $0.

 

Do you mean pays $975 off the investment loan, then transfer into the Selfwealth account from the investment loan as redraw, to then purchase $1000 dollars worth of shares?

Sounds like it would work, though I'm no accountant

 

You could argue that.

The ATO seems to see borrowing and parking in an offset as a quasi LOC. So i would be like $15,975 of a LOC is used. If you pay in $775 you would be reducing the LOC down to $15,000 and then redrawing the $1000 to invest would make the whole of the borrowed money relating to the investment.

 

I'd be tempted to put that $25 towards a KFC dinner special with an upgrade on the sides.

 

I’ve had many residual amounts of < $10 from loans that get mixed in with personal cash in the broker account. Happy for the ato to recalculate the minuscule non-deductible amount if I ever have a review (touch wood) coz I’ve no intention of tracking it

 

Exactly, if ato wants to figure this out, I will happily let them do so.. I am not going to scratch my head over it