Hi All,
I hope you are all well!
I have a specific example i would like to workshop as well as a couple of questions around debt recycling and was hoping to clarify some items in relation to this topic.
I currently have some ETF holdings (ETHI and QUAL) in my personal name that i would like to restructure, sell them down and invest that same amount into one singular ETF (NDQ) as i have had a change of investment strategy. Before undertaking this transaction it occurred to me that i could potentially debt recycle this amount through my PPOR loan, i just wanted to confirm this would not be considered a wash sale or something similar. I think it's ok as my actual investment strategy is changing with the tax benefit as a secondary benefit but would like to confirm.
Please see below for my follow on questions using hypothetical amounts. Just as a disclaimer i am not looking for any financial advice i'm comfortable with the investment decisions i just wanted to confirm the mechanics with the loan structure and to ensure this would satisfy the ATO.
The Process/Structuring
- Split existing PPOR home loan ($250k) into two (2) parts Split 1 (Non-deductible) $125k and Split 2 (Deductible) $125k.
- Sell ETF's above (ETHI and QUAL) and use the sale proceeds to pay down Split 2.
- Redraw $125k from Split 2 directly to brokerage account.
- Invest $125k in NDQ
Would the ATO have any issues with the above transactions/structuring?
Would i also require a seperate brokerage account to keep the debt recycled amount seperate or can i simply use my existing brokerage account?
Deductibility
The PPOR loan is currently in joint names however, the brokerage account is in my personal name. I'm assuming the deduction only applies to me is this correct? And does it mean i can only claim 50% of the deduction as the loan is in joint names but only being claimed against my personal return or would i be entitled to the full deduction of the the interest against the $125k above?
Thanks in advance for your assistance!
Regards,
ZD
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