can redraw be deductible?

[john doe]

Hello,

I was just wondering....

I have a P&I home loan for my PPOR, with about $40k available to redraw.

1.If I was to redraw an amount for investment purposes, say to buy shares, is the interest on the amount redrawn tax deductible?

2. the home loan is in the name of both myself and my wife. But the shares will be bought in my name only. From what I've read on this forum, I'm assuming the tax deductibility still goes to me as the most important thing is who's name the investments are in.

3. If I only wanted to buy up to $40k of shares, is it better then to just redraw from my home loan to do this? Or is it still better to take out a LOC to keep everything separate?

Thanks in advance for any replies

John

[DaleGG]

HI John

Yes, the interest on the redraw will be tax deductible because the purpose of the loan is to buy an income producing asset - the shares.

Because you are buying the shares, the interest will be decalred against your tax return alone.

The redraw is probably the simplest way to do this, bt, as always, keep good records that show a trail of the use of the funds.

Dale

[john doe]

Thanks Dale. I (and I'm sure everyone on this forum) really appreciate your advice and the time you give to this forum.

John

[john doe]

Hello,

Another question just popped into my head related to this topic. It is probably more a financing qu, but I was wondering...

1. If I redraw say $20k from my home loan to purchase shares, and later on I want to re-finance and sell to a trust, how do I retain the deductible part of the loan devoted to the $20k in shares (because the trust now owns the property that once backed the loan for my shares)???

2. I'm thinking that if I buy my wife's half of our property, then the tax deductible loan would simply be = whatever I borrow to cover my half of the property plus the $20k used to buy shares. Then all I have to do each year is tell my accountant which part of the loan was used for each investment. Is this correct???

Thanks for any replies

John