How do I negative gear my former property, whilst joining the title on my spouse's property?

 Author: George_2024(Newbie)Newbie

16 Aug 2024

Thanks for taking the time to reply Ashely.

I'm certainly not talking about claiming interest expenses on our main residence.

It is my understanding that you can't just take all the equity out of an investment property and spend it on xyz and suddenly use the new increased interest amount as a deduction, unless that equity taken out is used on another investment, am I wrong on this?

For example, Steve owes $200k on his mortgage and pays 5% per annum in interest deducting $10,000 each year from his taxable income, Steve then redraws $50K in equity to buy a boat. It's my understanding that Steve can not now use the new amount owing of $250k on his investment property to calculate his deductible interest as that $50k was not used for investment purposes. Again, am I wrong on this?

So going back to my original question of my investment home I now owe only $30k on, if I take out $300k equity and use that equity to pay down or off my wife's mortgage, do I now qualify to use the whole amount owing on my investment property, which would be $330k as a calculation to use in the tax deduction of my tax return?

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 Author: AshleyATO(Tax Time Tech Expert)Tax Time Tech Expert

19 Aug 2024

Hi @George_2024

The guidance on our website linked above is what you need to consider in determining the deductibility of your interest expenses for your rental property. If your $330k mortgage includes a $300k component that relates to your main residence then the total amount would not be available as a deduction in your tax return.

 

If you want to engage with us further to request a private ruling to receive specific advice on your situation you can request one by completing a form and sending it to us.

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