Using Redraw to invest Withdrawing from a loan is considered new borrowings for tax purposes. So the same principles apply as to all loans. It is generally the use the borrowed funds are put to that determines deductibility. The security of the loan does not matter for tax deductibility reasons. The reason using redraw is generally a no no is it usually results in a mixed purpose loan. If there are other monies which have been drawn down and used for other things then increasing one loan to buy a property will result in a mixed purpose loan. See my other tip on why not to mix loan purposes. So unless your loan account balance is $0 it is best not to use redraw but to set up a new split before borrowing. However where your loan is Interest Only it is possible to use redraw and to later split the loan into the relevant portions. If doing this you should not make any deposits to the loan account other than interest. Ideally you would split before borrowing but some people buy property at short notice with no planning. The main point is that using redraw will result in a mixed purpose loan - unless the redrawn amount is used for the same purpose as the underlying loan.