Hi comrades,
I have paid off my principal place of residence home loan. I want to know if I take out equity and use it to invest in the stock market, am I able to claim the interest charges during tax time?
I.e take out $100,000 loan against my PPOR, invest it in the stock market and claim the 6% interests charges during tax time.
You need to be careful if how it’s created, but in general you can deduct interest if you use it for the stock market,
The problem is your home loan is for your home.
If you redraw it's considered a new loan. This is why you don't get full deductibility if you ever redraw to buy a car/holiday then convert the home to an investment
It's not a problem at all, the ATO don't care what the loan secured against, only the purpose (what the funds are used for).
A lot of people confuse the two and for example assume that interest on any loan secured against an investment property is tax deductible; this is incorrect.
I’ve seen plenty of examples of home loans used for shares and ato has denied deductibility. This is due to the mixing of private home loan and investment, you need to get your legal structures right. That is all I am saying. Redrawing some cash from home loan and buying shares isn’t gonna cut it.
You can definitely do this to invest in property, so I would think that investing in stocks would be no different. Speak to your bank or accountant to confirm this.
I personally haven't used this, but another option may be to use a product such as CommSec which offers a margin loan allowing you to utilise the loaned funds to invest in shares, options, or managed funds. There may be other similar products out there.
This is not financial advice. Please research the proucts to determine if they are right for you and whether they suit your goals and your risk appetite.
Get lots of advice and be very careful before you go anywhere near a margin loan
Yes.
I mean what could possibly go wrong? 😁
he meant YES this is an interesting topic
Just think, if op loses money on stock, can keep taking more money out of PPOR!
especially considering they now said its for crypto :)
In that case NO.
Will depend if your existing mortgage is still active (but fully offset) or discharged.
If still active I would suggest organising with your bank to implement a loan split, making a dedicated loan portion which you will redraw for other investments
(Eg detailed in here https://www.propertychat.com.au/community/threads/tax-tip-9-…)
If discharged, you'd be making a new loan with the aim to use your existing home as collateral (effectively a new mortgage) and dealing with that process (again, I'd suggest a split loan, you want to keep the portion that's being used for investment seperate to any loan portion you'll now be paying down against the loan on your property)
Having done the exact thing as the op is asking, no idea why this comment got down voted :/
I said stock market but I’m really planning to put my foot in crypto
Lol. Good luck!
For crypto, you may find it difficult to justify the tax deduction for interest as you'd need to be actively trading to produce an "assessable income". I dont think "Hodl" would satisfy either of those conditions
https://www.ato.gov.au/individuals-and-families/income-deduc…
If you borrow money to buy shares or related investments from which you earn dividends or other assessable income, you can claim a deduction for the interest you pay.
Are we closer to the top of the market in crypto or the bottom?
Sheep buy at the top, wolves buy at the bottom
terrible idea. Don't gamble what you can't afford to lose.
OP - Adam Ahmed (CA/Solicitor) ran a workshop on this subject at the Sydney Bitcoin Alive conference not 2 weeks ago.
The strategy he was putting forward sounds like what you are looking for, but it was 4D chess to my equity-free ears. He was planning to host further workshops on the subject and welcomed people reaching out:
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Yeah, taking advice on technical crypto asset strategies from someone unable to setup (or afford to pay someone to) a simple WordPress site reliably. Seems about right.
Its not great for his business, but that is a dumb ass prerequisite in the context of this post. The guy's offerring accounting services specific to purchasing Bitcoin against housing equity (among other vehicles) to help you work within the confines of tax law in Australia. He is a qualified accountant and tax lawyer in Australia. Who gaf if he knows about Wordpress site reliability. How many people are offering this service to the public in Australia. OP, hopefully it will be back up soon
Yes.
Make sure it's a new loan/application. Make sure the proceeds of the loan do nothing else other than go into your share trading acount and start buying shares.
Anything else and it would be a mixed use loan, and apportioning the deductible interest wil be a PITA.
OP - you can do this, as the purpose of the redrawn funds are to generate income. Just make sure you have it all clearly separated from a reporting perspective, dates and amounts, and that you only claim the interest on the amount you've invested.
Many people go the extra step of taking out a new loan product for what you're doing which is the gold plated solution but it's not necessary if you can acount for everything yourself. I've done it in the past (stopped doing it a few years ago) and never had a problem with the ATO.
Have you been audited? If not the fact you haven't had a problem with the ATO is meaningless.
Err no. The fact that I haven’t been audited is sufficient to indicate what I did was above board. People get audited when the ATO spot something fishy. They have had years to audit me and didn't. And if they did, I have all the evidence.
I think you grossly misunderstand what information is available to the ATO and how many audits are conducted.
Many people submit incorrect claims and receive refunds. That is not any indication of the validity or legality of the claims.
I'm not saying you personally did anything wrong, only that any individual not 'having an issue' with the ATO is not an indication that their claims are correct, if they haven't been audited and found to be correct.
Two issues - the loan itself and the purpose of the loan.
If the purpose of the loan is for income generating investment purposes then the interest paid is deductible