If I use some of the funds I have in my redraw account to start a share portfolio will the funds be tax deductible?

Hi Jacinta,

Ordinarily borrowed money used for investment purposes would be tax deductible, however taking money out for your redraw likely won’t be.

It becomes very difficult to work out what part of your interest cost is for your home loan & what is the investment part.

Best to talk to a mortgage broker about having your loan ‘split’ in this way you can have a portion of your loan set up for the investment in shares specifically & therefore deductible. Whilst the remainder split will be for your home.

Hope this helps.

Regards
James

If the purpose of the funds to be redrawn is for income-producing purposes, then that portion of the interest bill IS deductible.
there is a case that everyone quotes called Harts case, and in this case the issue of the purpose of the loan and the proportion to be claimed is examined.
the issue becomes figuring out how much of the interest is for a creditable purpose, expecially when redraws, repayments additional drawdowns etc etc take place.
it can get really complicated to figure out how much of you loan is deductible when you have a house, some shares, a car and a holiday all sitting against one mortgage.
that is why a split facility can make life a LOT easier for everyone.
Talk to your mortgage broker about a split facility. Best also to talk to your accountant about the tax ramifications and what he or she will need to get the best bang for you buck.
cheers
BC

Hi Jacinta,
Brendan and James are correct. The funds “could” be deductible in the way you have explained but a structured loan split is a clean and traceable way of ensuring your accountant and the tax office both see it the same way.
I would be more than happy to sit with you for an obligation free chat.
Best regards
Scott