IP expenses & interest offset


Am I still able to offset the 100% of the interest if I redraw funds I have in loan property "A" to pay expenses related to property "B", including council rates, water, insurance and interest on the loan?

Both properties IP and are under my name, therefore everything goes to the same tax return by the end of financial year.

Sort of.

The answer is Yes - However the mistake you may likely make is to keep a single loan and claim the whole of the interest against A. The reality is that most of the interest relates to A and some to B and apportionment is required. Apportionmnet isnt a great idea. Seperate loans are better.

You will argue that its all deductible so who cares ?? Well imagine if you sell B. So B has no future deduction. But some of loan A relates to B. Then one day you buy a car (private) and it all ends up a mess.

Its always wise to segerate loans so that deductible purpose is quarantined. ie : Loan A is to buy A. Loan B is to do the improvements etc. Loan C was to buy IP #2. Sub accounts can assist.

I recently assisted a client whose tax agent totally stuffed his deductions the way you propose. The whole of the present outstanding related to IP # 5. But agent had split it 20% each....Review going back 4 years showed no loan for IP1, 2 3 or 4. So a high risk of audit detection. ATO wont argue - They will just disallow the whole deduction and let you argue it on objection / appeal etc.