Tax deductibility

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(Initiate)Initiate

9 July 2024

Hi.

We have 2 investment properties A & B.

On Nov 2023, we sold the investment property A and then put some of the capital gain proceed (say, $50K) from the sale of A into investment property B’s redraw facility (B does not have offset account).

Our question is : If we draw down that $50K from the B redraw facility to pay CGT this Oct 2024, will the interest of $50K still tax deductible in future FY tax calculation?

The purpose to put the $50K temporarily in the investment property B redraw facility (before using it to pay the CGT) is to reduce interest payment for B (therefore reducing tax deduction claim) this FY.

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AnitaATO

(Community Support)Community Support

24 July 2024

Hey @TTS,

I can certainly see where you're coming from.

In this instance it may be best to get tailored technical assistance. They can tailor a response to your specific circumstances.

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AriATO

(Community Support)Community Support

13 July 2024

Hi @TTS

Redrawn amounts are looked at as new borrowings. It depends on what you do with the 50K. It needs to be used for income-producing purposes for the interest to be claimed.

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TTS

(Initiate)Initiate

16 July 2024

Hi @AriATO.

Thanks for the reply.

The $50K will be used to pay the CGT from the selling of investment property A, but it will be deposited temporarily in the investment Property B redraw facility until the due time to pay this CGT.

Can we see the reduced mortgage payment for investment property B as an income producing activity? As the $50K interest for around 11 months in investment property B redraw facility will produce interest to reduce the interest paid, therefore making less tax deduction claim for FY2023-2024.

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AnitaATO

(Community Support)Community Support

24 July 2024

Hey @TTS,

I can certainly see where you're coming from.

In this instance it may be best to get tailored technical assistance. They can tailor a response to your specific circumstances.

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Liked by TTS

TTS

(Initiate)Initiate