PPOR to IP strategy

[stumpie]

Hi all

Wondering if I could get some guidance on the following situation.

If I had a PPOR valued at $500K and non deductible debt of $200K with a redraw of say $50K.

If I use $30K of the redraw for a reno on the PPOR and $20K for lifestyle expenses say going on a cruise. In 12 month's time if this becomes an IP is the loan of $250K now considered a deductible debt?

 

[Paul@PFI]

No.

The purpose of the borrowing is the relevant issue. The portion that was for the original acquisition is deductible. The renovation redraw too. The rest not.

$230k may be the deductible provided you didn't use any loan proceeds previously for any purpose other than to acquire the property.

 

[Terry_w]

Use not security!

 

[superAndrew]

only the portion that is used for investment to produce income is tax deductible.

So the $30k will be deductible and whatever portion of the $200k that was used to purchase the property and/or repair/improve it is deductible.

Cheers
Andrew