Repaying Credit cards

Hi everyone,

I've used my personal c/c's over the last 12 months to do cash withdrawals to pay the mortgage and reno costs at different points as cash was very tight.

I've just had the IP revalued after DA approval and a brisk reno. I expect to be able to repay all of these amounts with money left over to secure the mortgage for the next 12-18 months.

My question is 1) Do I keep a list of the cash withdrawal transactions I've done on the c/c's to pay the mortgage and repay just these amounts to ensure 100% interest deductability on the current IP mortgage? I don't want to repay more than the amounts I withdrew to be used as mortgage payments

Question 2) Is there a better way to repay this c/c debt and not lose the interest detectability of the mortgage?

Sorry if this is not coming out all that well, in my head it looks like this

Withdraw cash advance from C/C
Pay current mortgage so bank is happy
Pay high interest on C/C from cash advance
Get revalue after DA and reno
New loan approved - additional funds are placed in the mortgage account this seperates property account from normal accounts
Work out cash advance amounts from C/C then repay the exact amounts from the new extra loan funds

All neat & tidy. The ATO sees a very transparent loan repayment?

First time doing this so please add your two bits worth if I'm wrong?

Hi Andrew,

your payments from the IP to the credit card will be repaying some personal expenditure as the ATO sees it
Andrew L,

If you have only used the CC for the IP then you're fine.

If you have also used the CC for personal expenses as well as the IP, then you have 'contaminated' the loan/s on the CC - and then you're up the proverbial creek.
I don't know how it compares.... but several years ago we needed to renovate and paid some expenses from a joint account and some from my account that was solely in my name. It was my old pay account from before we were married. We did this because we needed to pay tradies and the loan was going to take a while to be funded, and the house was empty so we needed to do the work and pay the tradies NOW.

We assumed (I know.... never assume :D) that we could organise a new loan to repay the monies. Turned out that the only way we could use the loan to recoup the money we had already spent was for my hubby to get a loan to repay ME for funds that came out of the account in my name. The funds we had used from our joint account were not allowed to be repaid with a tax-deductible loan.

It was a lesson for us as to the twists and turns of the ATO and how careful you must be to keep loans and personal spending totally separate.
Hi Andrew,

your payments from the IP to the credit card will be repaying some personal expenditure as the ATO sees it

Even if I only repay the exact amount taken from the card for the mortgage? I'm not trying to pay back interest either just the principal amount withdrawn from the cards to repay the Ip mortgage.

what if i have a loan from myself to the mortgage account in the exact amount of the cash withdrawn from the cards and repay that loan as opposed to the cards?

I'll email my accountant and get some other words of wisdom.

Thanks for your help guys
Questions, questions, ...

1) Is this property solely in your name ? Or joint names, or are you a Trustee ?

2) Were these "renos" mere correcting wear & tear from your use as an IP, or are they improvements or initial repairs ? This dictates whether you can claim deductions for actual expenditure incurred on the "renos". The interest on the borrowings is OK.

3) Was there at any time a balance from private drawings in your credit card account between IP withdrawals and repayment ?

4) Is your IP mortgage an interet-only loan ?

You have no idea how mixing funds and refinancing can contaminate your borrowings ... just like swine flu.