tax deductions on interest

Evening SS'rs

I have done a bit of a search and can't seem to find the answer this one.

If I purchase an IP with equity from my PPOR that is negative geared and use additional equity from my PPOR (approximately $5000 annually) to fund the shortfall is the additional interest on the $5000 tax deductible ?

Thanks

Logan
 
You cannot purchase with equity, only with money. Money may be borrowed against the equity in a investment property or a main residence.

It is the use of the money that determines deductibility not security.

This much you know. But you appear to be asking can you borrow to fund the shortfall in a negatively geared property. The answer is 'maybe'.

Although interest on money borrowed to pay interest is generally deductible if the underlying interest is deductible, ATO have issued a warning that they may deny the deduction of interest on compounding interest under certain circumstances. You could be compounding interest in this case.

Seek your own tax advice but it may be possible to borrow to pay expenses rather than borrowing to pay interest and this may be safer.
 
Seek your own tax advice but it may be possible to borrow to pay expenses rather than borrowing to pay interest and this may be safer.[/QUOTE]

Thanks Terry - when you say expenses do you mean management fees, rates and water etc ?

I have read a few books of Michael Yardley and he recommends covering holding costs with equity - I just can't work out if this is tax deductible
 
Seek your own tax advice but it may be possible to borrow to pay expenses rather than borrowing to pay interest and this may be safer.

Thanks Terry - when you say expenses do you mean management fees, rates and water etc ?

I have read a few books of Michael Yardley and he recommends covering holding costs with equity - I just can't work out if this is tax deductible[/QUOTE]

All non interest related costs.

I would advise tax advice on Michael Yardney's approach. Part IVA could be an issue so I wouldn't advise clients to do it without a private ruling.
 
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