Fix Contaminated / Mixed Use Home Loan

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  MrHyde on 07/10/2017 - 06:54

  +1

  How much you get back in tax deductions depends on your marginal tax rate.

  If your marginal tax rate is 45%, then you would get back 7.2K just on the interest. However, if your marginal rate is 32.5%; you would get back 5.2K.

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    fritzsticker on 07/10/2017 - 12:08

    Ah cool thanks mr hyde.. That cleared things up on how much i recieve back..

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    redfox1200 on 07/10/2017 - 12:58

    they will only get the marginal tax back on the loss (rental income - (interest + depreciation + all other expenses))

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      MrHyde on 07/10/2017 - 13:04

      Yes, but if the loan is not deductible because it has been polluted; then they will still get marginal tax back on their loss or gain of (rental income - (depreciation + all other expenses))

      The difference between that and your formula is the interest. So, the difference between the two is the marginal tax on the interest component. That is how much he would potentially lose if he cannot fix his loan structure.

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        fritzsticker on 09/10/2017 - 10:36

        thanks Mr hyde

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  Kenb0 on 07/10/2017 - 08:56

  What's there to fix? From the information you gave, the original loan was for your PPOR i.e. Not deductible. Then, you redrew 100k out of the loan for personal use, also not deductible. At this point, nothing is for mixed purposes, it's all for private expenditure which isn't deductible. So it's not mixed purpose nor contaminated,so there's nothing to fix.

  Now, if you want to convert your PPOR to an IP in future, that's a different thing. To do it properly, hopefully you had your PPOR loan as interest only with an offset, and you've been putting money into the offset to lower the interest cost. If you had it setup differently to that, it'll be problematic to convert it to an IP loan

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    dcep on 07/10/2017 - 10:17

    Care to explain more ?

    Not as simple as redraw everything out then only change to interest only offset IP ?

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    fritzsticker on 07/10/2017 - 12:14

    Yes next year planning to convert PPOR to IP..

    It wass setup as P&i loan with offset.. it was a mistake and a lack of research and understanding from my side.. 4 years ago it would have been easier to setup interest only loan with offset… but now a new application needs to be done..