Question about refinance

If you buy property 1, but you are unable to obtain a loan at that point of time, but you are able to refiance for a loan at a later date.

In this case, can you still write off the interest for that loan as the cost of property 1? Or is it only allowed to be written off as cost of property 2?

Let’s use an example:

Let’s say I buy property 1 at $200K, but due to some circumstances (such as I have a new job and have not completed probation when the purchasing took place) I was unable to get a loan of $160K (assuming 80% ration).

I then fork out $30K more to do a renovation and bring the property value up to $300K.

Suppose say, 6 months down the track, I apply for a refinance and bank approves $240K loan (80% of $300k after renovation) for me to be used to invest in property 2.

My question:

Legally and tax wise speaking, am I allowed to use the interest for the entire $240K as cost of property 1?

Or is it a requirement for me divide this into 2 portions, interest for the the original $160K as cost for property 1 and the interest for $80K top up for property 2?

Or am I only allowed to write off the interest of entire $240K as cost for property 2 only?

• This topic was modified 5 years, 4 months ago by  Steven. Reason: math error