did i contaminated my equity loan

Hi experts,

I recently got my equity loan funded against my PPOR and the funds are available in my offset account which is also connected to my PPOR loan account. As I am not settling for another month for my new IP, I moved the money to equity loan (separate loan number) thinking I will redraw down once the money is required. Reason being I cant claim interest while IP is not settled yet. Should have done a separate offset account against equity loan.

Did i contaminated my new equity loan by doing this? Is the interest on redrawn amount is still tax deductable considering it will be used for funding deposit amount for IP? or should i need to arrange for new loan now by paying out this equity loan considering i have a month to arrange the finance.


Thanks for looking.
VG
 
Can you make the account an offset against the equity release loan?
This achieves 2 things
1) Reduces interest to zero (since equity release loan balance = acquired funds in account balance) therefore no tax deduction to worry about contaminating
2) If offset against a PPOR loan you'll ruin deductibility of the funds.
 
Did i contaminated my new equity loan by doing this? Is the interest on redrawn amount is still tax deductable considering it will be used for funding deposit amount for IP? or should i need to arrange for new loan now by paying out this equity loan considering i have a month to arrange the finance.


Thanks for looking.
VG

It will be, but it's currently not?
 
How I'm reading this is you've got ppor with 2 splits
1. Original ppor loan with offset
2. Equity loan, no offset.

If the funds are all sitting in the equity loan with the balance at zero, when you redraw to purchase your IP the equity loan will be fully deductible.
 
Did i contaminated my new equity loan by doing this? Is the interest on redrawn amount is still tax deductable considering it will be used for funding deposit amount for IP? or should i need to arrange for new loan now by paying out this equity loan considering i have a month to arrange the finance.

Hi VG

So for instance, you took out a $10 equity loan - and placed that $10 back into the loans redraw for future use? If so - I can't see an issue with that.

Cheers

Jamie
 
How I'm reading this is you've got ppor with 2 splits
1. Original ppor loan with offset
2. Equity loan, no offset.

If the funds are all sitting in the equity loan with the balance at zero, when you redraw to purchase your IP the equity loan will be fully deductible.

I'm reading this structure into it as well, but if the equity loan funds are in the offset account and it's offsetting the PPOR loan and you're creating a bit of a grey area here for future deductibility.

I'd suggest moving the funds back to the redraw facility of the equity loan. Don't claim any interest already charged, only interest charged after the IP settlement. Pay your deposits and purchase costs directly from the equity loan or another virgin account (not the PPOR offset account).

The PPOR offset account should only be used to store money that is income, not money that is borrowed.
 
Thanks Peter for your suggestion.I will be getting a new offset account open which is attached to equity loan and move funds from equity loan redraw to the new offset account.

Thanks Jamie and Jess.
 
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