I have another radical idea(I don’t know if you would call it radical but anyway), and I haven’t had one of thse in a while now.
So for example you buy a property for say 100K and you are at the LVR of 80% then it increases to 150K, you can now access 80% of this 50K to keep the LVR of 80.
So you refinance by 40K. Now you have a loan of 120K.
Ok this extra 40K would usually not be tax deductable(the interest im saying here). But if you were changing between tenants and you felt it necessary to grab some of that equity then you could finish the deal with the current tenant. Then a day after you stop tenanting to class it was your residence(like you put your postal adress there for a week) and then during that time get another tenant set up so you can rent in one week. So now the property is classed as a sort of new IP and the total loan over the property of now 120K is tax deductable instead of the before 80K.
Is this viable? Is this logical? wise? anything? Legal???
Or is it one of my radical ideas that is off track completely?Hope to read some replies, thanks guys.
Regards Christopher Fife.Hi Chris,
That would be nice, but unfortunately the tax deductibility of interest is based on what the funds are used for, and in this case you are still using the actual funds for something private.
Another angle, though is that if you used a HDT you can effectively borrow funds through the trust to redeem your units and so claim a tax deduction on the interest, even though you use the funds for whatever purpose.
whats a HDT?
Hmm, Im confused here, I know with a refinance you cant use it for private and still obtain tax deductability. But if you are cancelling the class of the property as an IP to a PPOR for a little bit(a week, how ever long) and then changing back to IP, then you get the increased loan. Hmm? is this still wrong. If it is oh well.Thanks alot trajik that was a very fast reply.
Hybrid Discretionary Trust or just Hybrid Trust, although it won’t be of use with your current property, but for future investments it can have a similar outcome to what you are suggesting.
I like your thinking though, but unfortunately, it doesn’t really matter what the property is doing, private or investment, it matters what the loan funds are used for, ie if the funds are used in the property that is earning income then it’s ok, but if you use those funds for private/non income earning purposes, then no deduction.
Thanks trajik that helped clear it up.
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