Hi,
I have an investment property with significant equity and am considering refinancing to access an additional $50,000 loan top-up.
My intention would be to place the $50,000 into a completely separate bank account and use those funds only for deductible investment property expenses over time, such as:
- council rates
- water rates
- landlord insurance
- repairs/maintenance
- investment loan interest
I would not use the funds for any personal expenses, and the account would be kept separate for traceability. My intention is to use this facility to fund ongoing investment property expenses from the loaned funds, rather than meeting those costs directly from my personal income, in order to improve my personal cash flow.
My questions are:
- Would the interest on the $50,000 loan split generally remain tax deductible if the borrowed funds are only used for rental property expenses?
- Does using borrowed funds to pay investment loan interest create any issues from an ATO perspective?
- Is there a preferred structure from a record-keeping perspective, such as a separate loan split and separate transaction account
I understand personal tax advice may be required, but I would appreciate guidance on the general ATO view of this type of arrangement.
Thank you.
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