hello, wondering if anyone can help me out with an answer:
We are currently renting out our PPOR and renting ourselves in a different suburb.
If i was to completely refinance my PPOR back out to 90% LVR (with a different lender) and have the difference sitting in an offset account attatched to my PPOR, Can i then use some / all of these funds to purchase a new PPOR without it affecting the tax deductibility of my original PPOR (now IP ??)i know the new purpose of the loan would be for private use, but ive read elsewhere if its taken from offset you dont have to declare between private v investment.
if someone could clarify it would be much appreciated!!!
thanks
x natalieHi Natalie,
No, the interest would not be deductible, as the purpose of the borrowing determines deductibility. The purpose in this case would be to buy a new PPOR.
hi dan thanks for the reply. so even if the money has been sitting there in offset for a considerable period of time (months) i still cant use it for private use ?? The original purpose of the refinance was to get access to our equity in case we ever needed emergency money or for if we were to buy another investment property. is there any other way around being able to access funds for a deposit on a new PPOR ??
You can access funds for the deposit on your new PPOR, it just won't be deductible.
Even if you were able to convince the ATO that you redrawing offset money, rather than borrowing to buy a new PPOR, I can't see how you would avoid the anti-avoidance rules. The only reason that you would borrow in this fashion is to avoid tax.
There have also been a couple of cases where the funds in the offset account were deemed to be new loans, so offset accounts don't always work when redrawing the money.
There may be some here who think you would be able to do it, but in my professional opinion, it wouldn't pass Part IVA (the anti-avoidance provisions) and if you got caught, you would face interest and penalties.
so is it just the portion i use that wont be tax deductible or the whole loan ???
i dont expect to claim the interest on the part i use for personal use, i just want to be able to access funds without having to have to sell my original PPOR .
is that were the split loan thing comes in handy ? so it keeps the loans separate so i (and my accountant) can easily see what is tax deductible and what is not ??sorry this is still all new to me. thanks
Hi Natalie
The cleanest way to go about what you are trying to do is, when you refinance split the loan into 2 parts so you know exactly how much interest you are paying for your orginial loan which will be tax deductiable and the personal use which will not be.
Regards Maurice
eilatan28 wrote:so is it just the portion i use that wont be tax deductible or the whole loan ???
i dont expect to claim the interest on the part i use for personal use, i just want to be able to access funds without having to have to sell my original PPOR .
is that were the split loan thing comes in handy ? so it keeps the loans separate so i (and my accountant) can easily see what is tax deductible and what is not ??sorry this is still all new to me. thanks
Sorry, I have misinterpreted what you are trying to do.
The original loan will be tax deductible still, as it retains it's original purpose. It's only the new borrowings that would not be deductible. I thought you wanted to have the new loan tax deductible.
The best way to do this would be to get a separate loan with the current PPOR as security. This way the current loan is untouched and unaffected, and the new loan is totally for private use.
thanks so much for the clarification guys!!! much appreciated!!
You must be logged in to reply to this topic. If you don't have an account, you can register here.
