This Common Home Loan Mistake Could Cost You $100,000 in Extra Tax (Australia)

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Redraw vs. Offset: Australian homeowners need to know the difference!
If you own a home that you may turn into an investment property, using a redraw facility (rather than an offset account) could cost you $100,000+ in extra tax.
In this video, I'll explain the difference between a redraw facility and an offset account, and why you should consider using an offset account if there's even a chance you could turn your home into an investment property.
Make sure you stick around until the end, because I'll also share a situation in which using a redraw facility can actually save you $100,000 in tax (hint: debt recycling). This works by turning your mortgage into a tax deduction.
Either way, if you're an Australian with a mortgage/home loan, you need to know these two strategies.
If you're interested in more Australian investing, tax, and personal finance tips, please subscribe.
www.edvest.com...
#redraw #offsetaccounts #mortgage #asx #ato #superannuation

Опубликовано:

8 сен 2024

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Комментарии : 11

@allanfirns8992 Месяц назад

Is refinancing an option to avoid this if you did redraw lets say $5000 from the home loan for an expense such as education for example

@kyle.edvest Месяц назад

If the education expense is deductible, the interest cost and tax outcome would be the same before and after the current property becoming an investment property. Refinancing and splitting the loan is an option and would make the tacking easier. You need to know the portions to be split though which can change over time once there's been p&i repayments.

@jackwsurfs 29 дней назад

Hey Kyle, great video. I bought my first home (an investment property, $500,000 mortgage) a bit over a month ago now. I've only just realised I've put all of my additional savings (~$80,000) into the redraw rather than the offset account. Is there a way of transferring those funds from redraw to offset, without sacrificing the tax deductible interest on the $80,000? Thanks!

@kyle.edvest 29 дней назад

@@jackwsurfs Hi Jack, thanks for the comment and feedback :) Congrats on the purchase! Your situation is a little different in that it's not hurting you now as there's no home (that you live in) with non-deductible debt but if this changed, you would be disadvantaged and unfortunately wouldn't be able to unpick it. In the meantime, the funds are in redraw saving interest, which is better than paying interest, even if you do get a tax deduction. If you decided to use these funds (created equity) to buy shares or use as a deposit for another investment property, it would be deductible :) Hope makes sense and useful :)

@jackwsurfs 29 дней назад

Thanks so much for your quick reply! I have two follow-up questions, if that's ok. 1. If hypothetically I transferred the $80,000 into offset... which I may have done... but didn't spend it (i.e. I continued to grow my savings) - would the entirety of interest paid on the loan still be tax deductible? 2. To repay the "created equity", is it as simple as transferring the amount withdrawn back into the redraw account? I hope this makes sense. Thanks again for all your great content.

@kyle.edvest 29 дней назад

Thanks for additional follow ups and would be a few more considerations to give a propertly considered answer. Feel free to email me at kyle@edvest.com.au :)

@jackwsurfs 29 дней назад

@@kyle.edvest Thanks Kyle, have just sent you an email.

@maspnmickle7283 Месяц назад

Fantastic info as always. If you use equity from your home loan would that also be tax deductible? Would I need to talk to my broker or tax accountant about that ? Thanks very much

@kyle.edvest Месяц назад

@@maspnmickle7283 thanks for your question. If you use equity to invest, that equity borrowed would be deductible. If instead that same equity was used for personal purposes e.g. New home purposes, or put in an offset and later used for personal purposes, it unfortunately wouldn't be tax deductible. Always good to get expert help if you're unsure :)

@Hunty49 Месяц назад

So if you have a paid off house, you can take a loan out on it to use as a deposit for 3 investment properties and the loan against your house the interest is tax deductible.

@kyle.edvest Месяц назад

@Hunty49 100% correct. You can take out a loan to use as a deposit for an investment property and borrow the remainder to be secured against the new investment property. Similarly, it can be borrowed to invest in shares or ETF's. Whilst often makes sense, taking on debt to invest naturally is taking on more risk. It's the purpose of the new borrowings that matter (e.g. To invest), not what those borrowings are secured against :)