Using funds from PPOR redraw as deposit for IP

Discussion in 'Loans & Mortgage Brokers' started by ctu1890, 28th Apr, 2017.

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  1. ctu1890

    ctu1890 Member

    Joined:
    22nd Apr, 2017
    Posts:
    15
    Location:
    Melbourne
    Hi Guys

    First time poster here. Any advice would be greatly appreciated for the following scenario:

    I originally intended on purchasing an IP with an equity loan 20% secured by a fully owned PPOR and the remaining 80% secured by the new IP. Pretty straight forward, both IO investment loans with offset etc...

    There is an existing loan on the PPOR with aprox 200k extra funds available as a redraw (no frills P&I loan, so no offset). This can be paid off in a month, once we offload another dud IP. So effectively we will only have debt (100% plus costs) on a new IP, and basically no cash.

    However, there may be an opportunity for me to secure a property before the new IP loans are set up.

    The question:

    If I use the existing redraw funds 200K from the PPOR loan now as a deposit for the new IP and then, prior to settlement, and once the new loans are set up, simply refinance this PPOR to an new IO equity loan, am I messing around to much with respect to loan purpose and tax deductability?
     
  2. Terry_w

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

    Joined:
    18th Jun, 2015
    Posts:
    41,566
    Location:
    Australia wide
    I have written a tax tip on this. See tax tip 6 in tax section.

    You will need to refinance the other loan to split it. If you don't then tax consequences
     
  3. ctu1890

    ctu1890 Member

    Joined:
    22nd Apr, 2017
    Posts:
    15
    Location:
    Melbourne
    Thankyou!