Tax deductible loan advice

Need some help with my situation as per below.

Currently have a fixed loan on my ppor of $285K (property value $360K) with around $28K in redraw which brings the balance down to $257K. I am currently in the last stages of getting a loan for granny flat approved for $124K. Once the granny flat is built I will be living in that and renting out the house, the funds in redraw I will move into an offset against the new loan. From a tax perspective will the deductible interest be against the full $285K or will be against the $257K? I have read what Terry_w has wrote but I am not sure if this situation is different.

Thanks for any input.

 

Where did the granny flat $124k come form?

 

Sorry, it will be loan from the same bank as the first loan.

 

a separate loan?

 

Yes, is that the best way to go about it?

 

Probably.

Now back to the original question - you want to borrow to park in an offset account? This will create a mixed purpose loan. Don't do it would be my advice

Tax Tip 1: Parking borrowed money in an offset account https://propertychat.com.au/communi...ing-borrowed-money-in-an-offset-account.1313/

Tax Tip 3: Mixing Loans - Don’t do it https://propertychat.com.au/community/threads/tax-tip-3-mixing-loans-dont-do-it.1517/

 

Okay, thanks. Further down the track my I would like to purchase an investment property, so would I borrow the redraw from the initial loan as part of the deposit so that the whole loan amount is tax deductible? If there is a shortfall in the deposit could I use funds sitting in the offset account from the granny flat loan (IO with offset) to fund the balance and still be fully tax deductible?

 

If you borrow to invest, without any detours, the interest should be deductible. Taking from redraw = borrowing.

If you use offset account cash to invest then the extra interest incurred will not be deductible as this is cash and not borrowings. It might be better to borrow further against the property if possible If not possible then maybe consider paying down the loan and then reborrowing.

Tax Tip 6: Using Redraw to invest
https://propertychat.com.au/community/threads/tax-tip-6-using-redraw-to-invest.1837/

Tax Tip 9: Don’t use Cash in Offset account to Invest https://propertychat.com.au/communi...nt-use-cash-in-offset-account-to-invest.2355/

Tax Tip 11: Further Borrowing against property deductible against the income it generates https://propertychat.com.au/communi...against-property-deductible-against-the.2563/

 

Thanks for that, much appreciated.