Interest deductible?

[TAG]

Hi all,

This is a taxing question!

The Bank has set up a home loan for our PPOR with a misa attached say 500K. We have paid down in the misa account equal to $500K. We are now looking to buy another PPOR (PPOR 2) and make the first PPOR as an IP.

We want to draw down the misa of the first PPOR of $500K and transfer it to the 2nd misa of the PPOR 2 ( and not claim interest on this). The first PPOR is now treated as an IP, with a loan balance of $500K.

Would the interest on the full loan amount of $500K be deductible based on the fact that the PPOR 1 (now an IP) is now producing income.

No use of the misa was tainted to pay down personal expenses.

Thanks for your comments in advance,

TAG

 

[Twitch]

I don't know the answer to your question but I'm intrigued by what a "misa" account is?

 

[LynnH]

MISA = Mortgage Interest Saver Account

It's an 100% offset account offered by the Commonwealth Bank.

Cheers
LynnH

 

[pulse]

Yep, interest fully deductible, MISAs are just places to park extra cash, once the MISA balance is zero, you are maximising your deductible interest and minimising non-deductible interest.

Pulse

 

[bennido]

MISA = Mortgage Interest Saver Account

It's an 100% offset account offered by the Commonwealth Bank.

Cheers
LynnH

Phew .... For a moment there, I thought Jar Jar Binks had entered the banking industry !

 

[asdf]

Hey Tag, Are you with CBA or were you using MISA as an example. Only 2nd time I've heard this. Not part of Burton's group are you?

 

[Rolf Latham]

Hiya

Not an accountant, but 100 % deductible.

This the basic entry structure for most borrowers in PPOR that we use, for exactly that reason

ta
rolf

 

[JoyBoy]

Fully deductible. Aslong as the interest is incurred in producing assessable income, in this case rent, then you can fully deduct the interest regardless of what type of bank account it is. It is the purpose of the expenditure that is relevant.

 

[Boyler_Room]

Rolf summed it up nicely. The outstanding balance at the time of the transition from PPOR to IP is 100% deductible, providing there were no additional borrowings used from that property to fund the purchase of the new PPOR.

Any additional borrowings would NOT be deducitble as they would be for personal use (new PPOR) rather than income producing purposes.

Cheers
BR

 

[Pat]

TAG,

Beautifully Structured, fully tax deductible for your "new" IP. Another who has received excellent finance structuring advice