All Topics / Help Needed! / Redraw to pay interest and expences on IP

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  • Profile photo of damitrx2damitrx2
    Participant
    @damitrx2
    Join Date: 2009
    Post Count: 2

    I’m sure this has been done to death somewhere on the web before, but I`d like some knowledgeable opinions please.

    I have a 2 loans secured by the same IP

    I want to start a family and use all possible funds to fund lifestyle / pay down PPOR and not the IP.

    I am currently using Salary funds / credit card to pay expenses and rental income goes into my salary account.

    Can I redraw from one loan to pay the other loan as well as all other IP expenses?

    Can I claim interest deductions on both loans as they are for the same income producing asset?

    Should I just use redraw to pay expenses and not interest and claim interest deductions on both loans?

    I am simply forgoing the future capital gain to use excess funds now.

    Kindrest regards Investors!

    Profile photo of Corey BattCorey Batt
    Participant
    @cjaysa
    Join Date: 2012
    Post Count: 1,010

    Capitalisation of interest can be OK with the ATO in certain situations, but not across the board. You’d want your accountant to be 110% happy with the structure before going down that pathway.

    Corey Batt | Precision Funding
    http://www.precisionfunding.com.au
    Email Me | Phone Me

    Investment Focused Finance Strategist - servicing Australia-wide

    Profile photo of damitrx2damitrx2
    Participant
    @damitrx2
    Join Date: 2009
    Post Count: 2

    Yes I thought as much.

    I am also not sure on this situation

    Can I at least use the loan no 2 / borrowed funds to pay expenses (excluding loan no 1 interest) and claim the interest on the loan no 2 for repairs / rates etc.

    Expenses could be $5-10,000 a year and that money could be better off reducing my PPOR

    Interest on that may be $500 and as its used to turn an income it too would be deductible.

    Rental income would pay the loan no 1`s interest and there fore not capitalizing it.

    Surely this = Safe with the ATO?

    Thanks again

Viewing 3 posts - 1 through 3 (of 3 total)

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