Tax-deductibility of using loan funds to pay tax

Discussion in 'Accounting & Tax' started by wylie, 28th Sep, 2021.

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  1. wylie

    wylie Moderator Staff Member

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    If someone redraws an investment loan and uses the funds to pay tax, is that redraw portion tax-deductible?
     
    wylie, 28th Sep, 2021
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  2. Piston_Broke

    Piston_Broke Well-Known Member

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    It may depend on what tax.
    Drawing out to pay Land tax should be tax deductable for eg.
     
    Piston_Broke, 28th Sep, 2021
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  3. Terry_w

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

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    Terry_w, 28th Sep, 2021
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  4. wylie

    wylie Moderator Staff Member

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    I'm wondering about paying income tax on rent received. We are going to have to allow for a tax bill that will get bigger as time goes by.
     
    wylie, 28th Sep, 2021
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  5. Terry_w

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

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    no, not possible.
     
    Terry_w, 28th Sep, 2021
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  6. wylie

    wylie Moderator Staff Member

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    Thanks Terry. I knew I'd find an answer on the forum.

    I'd thought about sitting some funds into the loan itself, but will save into an offset account once we come off fixed interest next year. :)
     
    wylie, 28th Sep, 2021
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  7. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Deductibility of interest to pay tax must arise from the ordinary business of the taxpayer. Investors wont pass the tests. Even a trust must consider how the funds are used.

    An investor may use their borrowing to pay other property outgoings instead. eg rates, land tax, repairs etc. NOT to be used to pay a loan without tax advice.
     
    Paul@PAS, 28th Sep, 2021
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