Hello,
I tried using the search function but it wasnt working for me unfortunately so i apologize if this is covered elsewhere.
Scenario:
3 years ago I bought a unit as my PPOR and now I am changing it to an IP and moving elsewhere. The homeloan allowed unlimited redraw and so the home loan basically became my bank account with my pay going into it and living out of it to reduce the interest as much as possible. In the next 6 months I am going to use that excess capital to purchase a second property.
I recently spoke to an accountant friend and he mentioned there might be some difficulty with using that account to claim the interest as tax deductable on the IP.
I looked around but could only find this information pertaining to the loan itself on the ATO website: http://www.ato.gov.au/individuals/content.asp?doc=/content/00113233.htm
You can't claim interest:
on the portion of the loan you use for private purposes (for example, money you use to purchase a new car or invest in a super fund),
and it gives an example
Example: Claiming part of the interest incurred
Yoko takes out a loan of $400,000 from which $380,000 is to be used to buy a rental property and $20,000 is to be used to buy a new car.
In my instance the loan was soley for the purchase of the unit.
So this leads to my question
1 - Will the way the account is set up affect my ability to claim the loan interest as a tax deduction on the IP?
I might just be being pedantic and paranoid but I want to ensure I am doing everything correctly and receive as much as I am legally entitled to.
Thanks in advance for your help and for reading my long question
I tried using the search function but it wasnt working for me unfortunately so i apologize if this is covered elsewhere.
Scenario:
3 years ago I bought a unit as my PPOR and now I am changing it to an IP and moving elsewhere. The homeloan allowed unlimited redraw and so the home loan basically became my bank account with my pay going into it and living out of it to reduce the interest as much as possible. In the next 6 months I am going to use that excess capital to purchase a second property.
I recently spoke to an accountant friend and he mentioned there might be some difficulty with using that account to claim the interest as tax deductable on the IP.
I looked around but could only find this information pertaining to the loan itself on the ATO website: http://www.ato.gov.au/individuals/content.asp?doc=/content/00113233.htm
You can't claim interest:
on the portion of the loan you use for private purposes (for example, money you use to purchase a new car or invest in a super fund),
and it gives an example
Example: Claiming part of the interest incurred
Yoko takes out a loan of $400,000 from which $380,000 is to be used to buy a rental property and $20,000 is to be used to buy a new car.
In my instance the loan was soley for the purchase of the unit.
So this leads to my question
1 - Will the way the account is set up affect my ability to claim the loan interest as a tax deduction on the IP?
I might just be being pedantic and paranoid but I want to ensure I am doing everything correctly and receive as much as I am legally entitled to.
Thanks in advance for your help and for reading my long question