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redrawing on IP

Discussion in 'Real Estate' started by mbennett84, 20th Jul, 2013.

  1. mbennett84

    mbennett84 New Member

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    I have been reading up on the complications of accessing your redraw from an investment property. I currently have 2 IPs. The first one I am tenants in common with an EX (50/50) and we are due to sell at the end of the year. The 2nd I have a redraw of $60 000 available. I wish to be able to access this money to put towards a new PPOR, as well as using the funds for the sold IP. Am I able to redraw the $60,000 to pay off the 1st IP, which is using it towards “an investment”. Therefore I’m able to bring the 2nd IP back to a higher interest payment for tax. Then selling the 1st IP and gaining all funds back in my pocket? This seems to me a bit sneaky but at the same time I think I’m going by the book. Any feedback is appreciated
     
  2. Pete Ramoza

    Pete Ramoza Active Member

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    Yeah sounds a bit sneaky but also could be ok. I'd check with your Financial Planner / accountant before making any decisions.
     
  3. Terryw

    Terryw Well-Known Member

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    You could do that. But once the 1st IP is sold the deductibility of interest on the $60,000 loan will be lost.
     
  4. GregR

    GregR Reid Consultants

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    My question would be, what is the use of funds for the $60k?
    You repay a portion of the existing loan on IP#1, so all you do is swap debt. As Terry said, once you sell IP#1, the purpose of the loan is lost so I am not sure you gain anything.

    For an investor, an offset account is always wise to consider, even if it is on an investment property if you do not have a PPOR.

    You can simply pull out the $60k from redraw for your PPOR but the interest for that component would now be non-tax deductible. The after tax affect may be $1k per annum worse off depending on your MTR.

    Greg
     
  5. Blueeye

    Blueeye Active Member

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    GregR makes a good point. I'm sure you've got a good plan but based on what you've said I'm not sure if it's worthwhile or not. IMHO