Redraw issues

[hematite]

I have a property which I have some equity in. I want to build some units on this property however the existing home loan doesnt have an offset facility, only redraw. What happens when I redraw funds from the home loan to pay the deposit on the construction loan? Will I lose tax deductibility for that portion of the loan as I am redrawing?

 

[Jamie M]

Depending on the lender you could possibly split the loan up - so set up a new loan split for the funds available in redraw.

Cheers

Jamie

 

[BMan]

if its an investment property already it shouldnt matter as you not mixing non deductible debt with deductible
but it would be much neater to do a split

 

[hematite]

It was my PPOR, now it's mostly vacant. Would that make a difference?

 

[Aaron_C]

If the purpose of the redraw funds is to build an investment property I don't see what the problem is?

 

[hematite]

If the purpose of the redraw funds is to build an investment property I don't see what the problem is?

edit: This is getting messy, I will call a broker.

 

[Terry_w]

edit: This is getting messy, I will call a broker.

Maybe an accountant is more appropriate as this is a tax question!

FWIW, if you are borrowing to construct then the borrowings relates to the income producing property. If the property is income producing, or will be then the interest will probably be deductible as will the interest on the loan below that.

But, to use redraw you could lose deductibility if you are not careful. Can you directly pay from the loan account for example? if not how will you get the funds out and to the builders etc.

Sounds like you need to consider the tax aspects and the loan aspects as well. Maybe a refinance is in order. Set it up properly.

 

[hematite]

Maybe an accountant is more appropriate as this is a tax question!

FWIW, if you are borrowing to construct then the borrowings relates to the income producing property. If the property is income producing, or will be then the interest will probably be deductible as will the interest on the loan below that.

But, to use redraw you could lose deductibility if you are not careful. Can you directly pay from the loan account for example? if not how will you get the funds out and to the builders etc.

Sounds like you need to consider the tax aspects and the loan aspects as well. Maybe a refinance is in order. Set it up properly.

Thanks Terry, yep will contact the accountant when they are back from holidays.