method for making PPOR interest bill deductable (legally)

[primaus]

throwing out an idea for the litmus test..

PPOR loan: 600k
$ in offset account: 100k
net loan outstanding: 500k

The idea is to redraw 50k from offset and place it into a asset (e.g. bond) which pays no dividends but provides capital return upon maturity (e.g buy bond for $90 which will mature in 12months at $100.. capital gain of $10)


The CG will be offset by capital losses accured in the past.

So under this scenario.. will the interested on the 50k drawn from PPOR offset acc be deductable?

 

[alexlee]

A withdrawal from the offset is NOT a new borrowing. Therefore, purpose doesn't apply and deductibility on the loan doesn't change.

Interest on the 50k is NOT deductible.

 

[Tom Alaka]

Why not:
1. split the PPOR into 2 loans - 550k and 50k loans;
2. Pay down the 50k loan to 0 from the offset;
3. You can now use this 50k loan for income producing purposes, and the interest will be tax deductible;
4. pour the income into the offset account; and
5. Rinse and repeat from step 1 when the offset is topped up to whittle down non deductible debt.

 

[Rob G.]

That's effectively a redraw, not using savings stored in an offset.

Cheers,

Rob

 

[boomtown]

I really doubt the ATO is going to let you treat that bond payment as CG instead of interest income.

 

[Ergophobia]

how about pay down ppor and open a LOC to invest with, now 100k of your loan is deductible

 

[alexlee]

The idea is to redraw 50k from offset and place it into a asset (e.g. bond) which pays no dividends but provides capital return upon maturity (e.g buy bond for $90 which will mature in 12months at $100.. capital gain of $10)

Do you actually have a product in mind to do this, or are you just speculating? The fact that you're using the word dividend together with bond suggests you're just hoping this sort of product exists?

 

[Terry_w]

If you really want to make the PPOR interest deductible all you have to do is move out and rent the place out.

 

[vaughan]

If you really want to make the PPOR interest deductible all you have to do is move out and rent the place out.

That's probably the ONLY way.

Except maybe to use the PPOR for a home business then claim some of the PPOR interest for that business usage.

This WILL have capital gains tax implications on the PPOR -- that is, rather than being completely exempt from CGT the PPOR will now attract cg tax for the period and proportion that it was used for business purposes.