Do you own an investment property? – Part 3

Do you own an investment property part 3

Many investors with an investment property have an investment home loan with a redraw account attached.

The benefit of the redraw account is that if you need money, for example, to repair or replace a bathroom or kitchen, the interest on this redraw component of the loan is also tax deductible, as the loan was used for matters associated with the investment property. 

However, the Australian Taxation Office is aware in some cases; investors have used this redraw account to improve their home bathroom or kitchen and are claiming the interest on this redraw loan. 

As this redraw loan is not used for investment purposes but for personal purposes, the interest is not tax deductible. The tax treatment is identical to if they had used a redraw facility attached to their non-deductible home loan.

The fact that the redraw is secured against the investment property does not make the loan interest tax deductible. The security for the loan is irrelevant for tax purposes. For the interest to be tax deductible, the loan proceeds must have been used for or on the investment property.

Should you require further information in relation to investment property deductions, please feel free to contact Peter Quinn by submitting an enquiry or calling us on +61 2 9580 9166 to book an obligation-free appointment.

The information in this document does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. It is important that your personal circumstances are taken into account before making any financial decision and it is recommended that you seek assistance from your financial adviser.