refinance and effect on tax deduction

[dehgam]

I will appreciate views of members of this forum on my question below which relates to refiancing.

We bought a property in 2008 which was our first PPOR. We did not have offset facily but unlimited repayments and redraw.

For about 2 years all our salary went as additional repayments to reduce interest.

We then bought a bigger property which became our new PPOR and converted the first property as investment property.

We used the redraw facility from the first property to pay for the deposit for our new PPOR.

I am aware that I can not claim tax deduction on the redraw amount because its not used for income generatin purpose.

I am now planning to refinance the first loan and use a line of credit facility to use the equity in first property to fund deposit for purchase of another property.

If i do this, then will i be able to claim a tax deduction on the interest I pay for the whole amount (including the redraw amount which was previously used as a deposit for PPOR under old loan)?

 

[agent007]

I will appreciate views of members of this forum on my question below which relates to refiancing.

We bought a property in 2008 which was our first PPOR. We did not have offset facily but unlimited repayments and redraw.

For about 2 years all our salary went as additional repayments to reduce interest.

We then bought a bigger property which became our new PPOR and converted the first property as investment property.

We used the redraw facility from the first property to pay for the deposit for our new PPOR.

I am aware that I can not claim tax deduction on the redraw amount because its not used for income generatin purpose.

I am now planning to refinance the first loan and use a line of credit facility to use the equity in first property to fund deposit for purchase of another property.

If i do this, then will i be able to claim a tax deduction on the interest I pay for the whole amount (including the redraw amount which was previously used as a deposit for PPOR under old loan)?

Deductibility of interest depends upon to whether or not the funds are used for income producing assets as oppose to where they are coming from. Thus, you should be able to claim the interest of the portion of the loan used for purchasing your new and old IP. Of course, you have to discount the portion used for your PPOR.

 

[Rolf Latham]

In shortm and in reality no..............

It isnt just the redraw portion thats the risk.

If you have been tipping all your cash in there and redrawing for living expenses, the bottom line might be that deductability is reduced by the full amount that you have tipped in over time.

Youd need to probably ID that and separate loans accordingly ?

ta
rolf