Tax deductibility Equity release.

[Demoivre]

Can someone clarify this to me once and for all?

If an equity release of a ppor is used as deposit for an ip. is that particular loan tax deductible?

I've had an offset against an ip loan and not the ppor loan because the lender said it has a higher rate and therefore should offset against it.

Cheers

 

[Tranquilo]

Yes it is deductible.
And your offset should be against ppor

 

[Jamie M]

Can someone clarify this to me once and for all?

If an equity release of a ppor is used as deposit for an ip. is that particular loan tax deductible?

Yes it is. It needs to be set up as a separate loan and not simply an increase of your existing loan.

I've had an offset against an ip loan and not the ppor loan because the lender said it has a higher rate and therefore should offset against it.
Cheers

You shouldn't listen to that lender. It really isn't rocket science (this isn't a dig at you - it's at the banker you've dealt with).

Cheers

Jamie

 

[Demoivre]

Yes it is. It needs to be set up as a separate loan and not simply an increase of your existing loan.



You shouldn't listen to that lender. It really isn't rocket science (this isn't a dig at you - it's at the banker you've dealt with).

Cheers

Jamie

Thanks Jamie. well the ppor was unencumbered. All the loans against the ppor was for investment purposes so was really wondering whether it matters if it was against it or the ip.

 

[Peter_Tersteeg]

If the PPOR was unencumbered, you can't have an offset account against it because there isn't a loan to offset.

Ideally the offset account should be against non-deductible debt. If you don't have any non deductible debt, then put it against the tax deductible debt (an IP loan).

 

[Demoivre]

If the PPOR was unencumbered, you can't have an offset account against it because there isn't a loan to offset.

Ideally the offset account should be against non-deductible debt. If you don't have any non deductible debt, then put it against the tax deductible debt (an IP loan).

Hi Peter,

I should have clarified better. The PPOR was previously unencumbered. Equity releases were then taken out from the PPOR to fund deposits with an offset facility.

Since the total amount of loan against the PPOR was for investment purposes hence tax deductible as clarified by you guys. I was wondering whether there really is a difference parked against it or an ip

 

[Jamie M]

Thanks Jamie. well the ppor was unencumbered. All the loans against the ppor was for investment purposes so was really wondering whether it matters if it was against it or the ip.

Ok - so then you don't have a PPOR loan per se since all loans are IP related.

Therefore - if you don't have any non-deductible expenses then park the funds in an offset linked to the loan with the highest interest.

If all loans are with the same lender - then question why they're on different rates.

Cheers

Jamie

 

[Demoivre]

Ok - so then you don't have a PPOR loan per se since all loans are IP related.

Therefore - if you don't have any non-deductible expenses then park the funds in an offset linked to the loan with the highest interest.

If all loans are with the same lender - then question why they're on different rates.

Cheers

Jamie

Thanks Jamie! Finally cleared it up for me

 

[Paul@PFI]

Can someone clarify this to me once and for all?

If an equity release of a ppor is used as deposit for an ip. is that particular loan tax deductible?

I've had an offset against an ip loan and not the ppor loan because the lender said it has a higher rate and therefore should offset against it.

Cheers

The security used for any loan should always be ignored. The USE of the loan to acquire income producing property is what determines deductions. You want to avoid blending loan purposes into one loan ie one loan which includes $100K for an IP and $30K for a car.

You can borrow against your home, your existing IP, your holiday home, pledge your kids as security or use car or boat as loan security and the ONLY issue that I would be concerned with is the question - What did you use the $$$ proceeds for ?