Redraw deductible or non-deductible?

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From: Paul Hickey


Hi everyone

I've just redrawn about $60k of equity on my home (a unit) in Sydney to shop for an investment property (unit or house). The $60k will go on the 10% deposit, all my purchasing costs and stamp duties, etc and anything left over into shares.

However, if we spot the right house, my wife and I might decide to buy it and move into it and make it our new place of residence, so that our existing unit becoming our IP.

So if the $60k is secured by the unit (the IP) but used to purchase our new home, is the interest on it tax deductible?

Conversely, if we didn't move and just bought an IP, would it be tax deductible then?

Paul
 
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Reply: 1
From: Duncan M


If you use the $60K to purchase an IP, the interest will be deductible.

If you use the $60K to purchase a new residence the interest will NOT be deductible.

The rule is that its the purpose of the borrowing that decides deductibility, not the security that the borrowing is secured against.

Duncan.
 
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Reply: 2
From: Glenn S


Bare in mind also that ONLY the part of the redraw used for the IP is tax deductable NOT the part used in shares.
 
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Reply: 2.1
From: Terry Avery


If you borrow to buy a house the interest is deductible.
If you borrow to buy shares the interest is deductible. Otherwise how do you
think margin lending works?
 
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Paul

Reply: 3
From: Brett Burt


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No and yes. Porky

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No and yes. Porky

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