I have a loan on a property that I rent out that has a redraw facility but no offset account (which was not available from the lender at the time I took out that loan). A separate rental property I also own has an offset account associated with its loan. To date I have used the offset account associated with the second property's loan to cover the costs of a mix of income producing and non-income producing activities. In relation to the loan for the property with only a redraw facility I have made additional payments into the loan, but to date I have not redrawn any funds from it. The available funds in the offset account associated with the second rental property have diminished over time, and I am now considering whether to redraw some funds from the loan which only has a redraw facility.
I am aware from reading Tax Ruling TR 2000/2 (https://www.ato.gov.au/law/view/pdf/pbr/tr2000-002.pdf) that "where the original borrowing is for income producing purposes and the taxpayer uses the redrawn funds wholly or partly for non-income producing purposes, that part of the accrued interest attributable to the redrawn funds used for non-income producing purposes is not deductible".
My intention, should I redraw funds from the loan with only a redraw facility, would be to use the redrawn funds only for purposes which would qualify as income-producing, so that the interest attributable to those redrawn funds could be fully deducted. Some of my specific questions are as follows: Would using the redrawn funds to pay for things such as land tax, council rates, water rates, repairs and maintenance etc. on EITHER of the rental properties be considered using them for income-producing purposes, even if some of the funds were spent in relation to the rental property not associated with the loan from which the funds were withdrawn? Could some redrawn funds be transferred to the property management companies (which currently make most of these payments on my behalf) for them to continue to make such payments and still qualify for interest deductions (assuming appropriate receipts from the property management companies to prove how the funds were spent)? If my understanding is correct, redrawn funds do not necessarily have to be spent on property-related matters for the attributable interest to be deductible, but could be used for the purchase of income-producing shares, for example. But would using some of the redrawn funds to make a personal superannuation contribution (and claiming a tax deduction for that contribution, so it became a concessional contribution) be considered a use of the funds for income producing purposes and also allow for the loan interest attributable to the funds redrawn for the super contribution to be tax deductible?
Thanks in advance to anybody who can advise in relation to these questions.
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