Tax Tip 6: Using Redraw to invest

@Terry_w I couldn't find if you already answered this.
I have an IP with $50k equity and want to redraw the equity to invest in Shares.
My questions is more from bank's lending perspective: will the bank lend me the $50 k equity for share purchase?
Thanks for your answer.

 

You will need to apply!

and you must meet all the usual requirements such as income for serviceability and LVR. Its not a sure thing - just because you have equity doesn't necessarily mean you can borrow.

 

@Terry_w and other knowledgeable people of this forum, I need some guidance and help. I am starting to find my second IP and came across this post. My situation is as follows
I have an investment property in a family trust with a loan of 300,000 (no offset account). I have parked 200,000 into this loan and I was going to use redraw to take out 80,000 to put in deposit for another investment property in my own name. Looking at this post it seems it is a not a good idea. So what should I do, should i cancel existing loan (don't know exact terminology) and get new loan with offset account for existing investment and put the extra 200,000 into the offset account, Can I then withdraw it from offset account when I need as deposit for other loan.

 

You dont have a investment property in a trust. The trust owns it. You are confusing yourself with a trust. An asset risk perhaps ? The nature of how the trust is indebted to you for the funds introduced should be a factor in any advice.

Few lenders will allow a person (lets call you a beneficiary) to access equity in a trust. It may be a breach of trust unless the trust can utilise the equity. And likely a non-deductible issue without some legal advice.

 

Thanks Paul, I am not trying to access the equity, I am only trying to withdraw my savings that I have parked into the loan temporarily.

 

You have made some mistakes there, seek legal advice.

 

oh, I did not think it will be that bad. Anyone that you would recommend in Melbourne, preferably in the western suburbs. Do I need to talk to a lawyer or a special type of lawyer? Any advice/guidance will be helpful.

 

@Terry_w and other wise members of propertychat, I’m still unable to wrap my head around the redrew.
Say my ppor loan has four splits of 100k each. I pay down split A to 0, then use the redraw facility to pay for expenses related to my investment property, mainly a large special levy of 20k but hoping to pay other expenses on a ongoing basis (making sure no detour of the money). So how is the claimable interested calculated? I suppose I can’t just claim interest on the whole 100k? But rather whatever expenses actually occurred and redrew out of the split?

 

Swe. S 8-1itaa97 . Interest deductible to the extent in relates to investments

 

Thanks a lot Terry.

 

Income producing investments !!!!!

 

Hi guys,

mixed loans - a no-no.!

1. But is there any way to quickly drawdown your offset against PPOR if time doesn't permit a loan split. Any workaround? How long are loan splits taking these days, is there a benchmark?

2. What if the person is lending the money to their trust for investment? A loan agreement is required either way, but would this help with the exercise? Say if the person doesn't want to or can't refinance to rearrange their debt structure).

Thanks!

 

1. mix and unmix later.

2. not sure what you mean. Lending to another entity doesn't prevent mixing

 

How does one un-mix? Still a loan split?

Yes sorry I wasn't very clear - I need to delve further into this one!

 

Read this
Tax Tip 44: How to Un-Mix a Mixed Loan
then get some tax advice

 

Thanks Terry!

 

I have 80k in my offset PPOR account and am looking to use that as a deposit for an IP.

Can I assume that for me to convert that 80k that I have saved up as my IP deposit I should take the following steps;
- Put the 80k into the main PPOR loan
- Request to redraw it as equity release into a new account and specifically use it for deductible use such as deposit, legals etc?

Without a LOC facility, is that the best option to turn my extra funds into good debt as I seek to buy an IP?

Thanks!

 

I wouldn't assume that without getting some tax advice!

 

Thanks Terry. Any particular tax tip thread you can point me towards that describes a similar situation where one is attempting to not use their own cash and 'borrow it' to make it deductible?

 

see my tax tip 1 for starters and there are more - but i am not in front of my list atm