Is borrowing deposits from PPR tax deductible?

Hi Jonathan

Yes interest is Tax deductible where the purpose of the funds was for investment irrespective of the security used.

As I have said many times over the years on this forum interest charged on an investment loan where the deposit was secured on a pogo stick would be Tax deductible.

Cheers

Yours in Finance

Under s8-1 ITAAA97 any expense related to producing assessible income cna be deductible.

But you may have problem. If you have redrawn from a non deductible loan you will be charged one large sum of interest each month. Only part of this will be deducctible. That is easy enough to work out. However if you are repaying this loan by paying PI and/or extra repayments then each of these repayments will be coming off the whole loan. So what this means is you are reducing the investment portion of the loan too and thereby diverting funds away from paying off the home loan sooner. This is costing you money by making more tax payable. This in turn means less money to go off the non deductible debt and compounding over 20 to 30 years this would be a heap of money.

Solution – see a tax advisor about splitting your loan now. Split into the relevant portions and from this point have the investment portion IO and then you can pay down the non deductible portion quicker and save more money.