withdraw from home loan o/s account for IP

[thyechen]

Hi,there! This is my first post to this forum

I bought an IP last week now tryingto figure out whether I can use money in my homeloan off set account to pay fo the IP and claim tax deduction.

I am confused as different people have given me different answers.May be I did not structure my question properly.

My home loan was $150,000, now balance owing is $130,000. I have $100,000 in my home loan off/set account, ie I am only paying interest of 6.23% on $30,000.

If I use the $100,000 in my home loan off/ set acc to buy IP ( this means I will have to pay interest of 6.25% on $130,000 on my home loan), is the interest on the $100,000 portion tax deductable?

Someone told me is not tax deductable because it comes out from my home loan off set acount, and the letter of offer clearly stated the purpose of the loan was to purchase an owner occupied property.

I checked the ATO website it states the they will look at the purpose of the loan.

However, a tax agent seems to think that it is still tax deductible. I am confused ...

My second query is :I issued a cheque of $20,000 from my home loan off set account for the deposit for the IP. Is the interest on $20,000 tax deductable?

Thanks for taking time to read this boring and naive.

Cheers

 

[Rolf Latham]

Hi There

In Short, yes and no...............it will depend on who you talk to.

A more tax effective aned cleaner way is to insert a 100 k Investment loan next to or on top of the Homeloan, pay the 100 k into that, and then redraw from that loan to pay for the IP deposit and costs.


The money in your offset account is currently offsetting a non deductible debt, and mixing the use of the money and loan will cause a bit of an accounting nightmare.

ta
rolf

 

[PrimeCommercial]

I am confused as different people have given me different answers. May be I did not structure my question properly.

Its probably best that you speak to a professional then

If I use the $100,000 in my home loan off/ set acc to buy IP ( this means I will have to pay interest of 6.25% on $130,000 on my home loan), is the interest on the $100,000 portion tax deductable?

No. The interest on your home loan will not be tax deductible

I checked the ATO website it states the they will look at the purpose of the loan. However, a tax agent seems to think that it is still tax deductible. I am confused ...

Find yourself a good accountant thats knows all about the world of IP's. If your not sure who to go to ask on this forum for your area.

My second query is :I issued a cheque of $20,000 from my home loan off set account for the deposit for the IP. Is the interest on $20,000 tax deductable?

No, you havent borrowed any money and therefore there is no interest paid. You've just taken cash out of an account.

Again, I wouldnt take my advice go and pay a professional for proper advice and not just any old accountant, one that has plenty of experience with IP's, preferably their own.

 

[thyechen]

Any good accountant in Melb East or North east ?

Thanks Rolf and Shady for your opinion.

Can any one recommend a good accounat in melboure east or north east that charge reasonable, that can advise me how to structure my existing home loan to make the re-draw from home loan off set tax deductable ?