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Withdrawing $$$ from IP to purchase PPOR

Discussion in 'Accounting & Tax' started by B-Mac, 12th Oct, 2015.

  1. B-Mac

    B-Mac Well-Known Member

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    Hey guys,

    If i have an I/O 100% offset loan for an IP, can i simply withdraw money from it to use as deposit for PPOR, without affecting my tax deductibility?
     
  2. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

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  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes

    But it will indirectly effect deductibility as the interest on the investment property will increase. But this should be deductible.
     
  4. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Not an accountant - but should be sweet.

    This is a good reason why parking money in an IP offset, rather than redrawing cash from extra repayments, is ideal.

    Cheers

    Jamie
     
  5. RetireRich101

    RetireRich101 Well-Known Member

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    so i understood correctly:
    say I have $100K in offset account, offetting for IP1. This $100k was originally form equity release and placed in this offset account.
    I used this $100K for the purpose of buying my PPOR
    This $100K incurs say $5000 in interest for the year.
    This $5000 interest incurred, is and will NOT be tax deductible

    is this correct?
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    So the $100k is borrowed money. You would have created a mess. Mixed purpose investment loan. Interest on investment property not deductible in full.
     
  7. RetireRich101

    RetireRich101 Well-Known Member

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    I get we dont mix business with pleasure if we can avoid, but in some circumstances where you cant source fund for your PPoR deposit, tapping into your equity/offset money from IP, to fund your PPoR may not be a bad decision?
     
  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    yes. Ideally you should split the original loan if you can and avoid depositing the borrowed money into an offset.
     
  9. Tyrone84

    Tyrone84 New Member

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    Im in a similar position as the OP.
    I have refinanced IP and released $100K into the offset account.
    If i take this $100K and use it as my deposit for PPoR, I wont be able to deduct the extra interest charged to the IP?
     
  10. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Bad move parking funds in the offset. You have created a mixed purpose loan.
    Seek tax advice asap to try to salvage.
     
  11. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    In most cases, when you access equity from a property it's important to create a new loan split for the new funds so it's easy to discern exactly what the funds have been used for. If you're accessing equity from an IP to use as a deposit, you need to split the loan to reflect new borrowing.

    If your IP is on IO payments, splitting the loan after the fact shouldn't be too much of an issue - it gets messy when any principle repayments (or any additional payments) are made on the loan.