HOMES AND MORTGAGES
Redraw from IP to invest in ETFs
Hello, we have an IP that is P&I, and we have about $5k redraw available. Is it worth pulling that out of the IP loan and investing in ETFs? Interest rate on the IP is 6.3%. If the above is a good idea, if I pull the $5k out, the interest on the loan is still fully tax deductible as the redraw is used for income producing purposes right? Doesn't that complicate the IP loan once I start redrawing funds to invest in ETFs? Is there a better alternative? TIA
Isaiah
28 December 2024
1 Comments
2 days ago
Hi Isaiah,
Whether it’s worth it depends on what return you expect to get from ETFs. If you think it’ll beat your interest rate after tax, then it’ll be profitable to do so.
As for the tax question, yes, if the investment is income producing (which almost all ETFs are), then the interest will be tax deductible.
Technically, part of your interest then becomes claimable against your shares income rather than property income, but the net result is the same. I wouldn’t say it’s complicated, but a simpler way would be to create a new loan split for say 20k (or 10k if possible), and do it that way, so that your shares/property loans are separate which just makes it easier to track what is what.
Hope that helps.
Like
1
•
Reply4000 characters left
Related posts
Homes and Mortgages
ETFs vs. offset accounts: When to move money?
I currently hold ETFs and have funds in offset accounts. Ignoring market fluctuations and tax implications, at what poin...
Homes and Mortgages
Debt recycling
Hi all. I've been working towards a debt recycling strategy and am now at the point of redrawing from my split loan and ...
Homes and Mortgages
Debt Recycling The Pearler Template
I am looking to debt recycle and I understand that for this to be tax effective, each investment needs to generate incom...