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Tax impact if refinancing PPOR loan with existing split already used to purchase IP

Discussion in 'Property Finance' started by e96anban, 2nd Sep, 2015.

  1. e96anban

    e96anban Member

    Joined:
    24th Aug, 2015
    Posts:
    22
    Location:
    australia
    Hi,
    I am looking at possibility of refinancing my PPOR to another banking institution due to limited split ability.
    I have 1 split I/O acc which have been used to pay for an IP. I am looking to change the account into a LOC when i refinance it.
    Since the fund withdrawn from new loan doesnt seem to be directly used to pay income generating investment, would this have a tax impact to the interest that I can claim for tax deduction??
    Appreciate some advice
     
  2. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,773
    Location:
    Perth WA
    If you refinance existing loans in their current form (ie keeping amounts the same) the deductibility doesn't change. If you do a top up, for eg changing a $100k loan into a $150k LOC, the new funds become deductible when you use them for investment. While they're unused, they aren't accruing any interest to deduct.

    BUT if you do a top up and use some of the funds for non-investment then it becomes much more complicated. It's better to create new loan splits to keep deductions clear, even when it's all for investment purposes.
     
  3. e96anban

    e96anban Member

    Joined:
    24th Aug, 2015
    Posts:
    22
    Location:
    australia
    Noted. Thanks jess