What are the tax ramifications for redrawing from one mortgage to
pay off another?
Q.
We have recently bought a property, which will become our
principle property, and we will borrow $390,000. We currently own
an investment property in my name, and our current principle
property in my partner's name. We have lived in our current
property for 18 months and it will soon become another investment
property. Both properties have a redraw capacity of $50,000. What
are the tax ramifications for redrawing from either property and
placing it in our principle property and thereby lowering our loan
to $340-350,000?
A.
For the interest on a loan to be tax deductible the purpose of
that loan must be to buy income producing assets. Therefore, if you
wish to get a tax deduction on the interest on redrawn loans those
loans must be used to buy investment property or shares.
Each week financial advisor Noel Whittaker answers your
questions.
