CAN YOU USE EQUITY FROM INVESTMENTS TO PAY OFF PERSONAL HOME?
Technically, you can use the equity from your investment properties to pay down your home (PPOR), however, this may not be the best idea from a tax perspective.
Having a good accountant on board can help you figure out the best strategy for your finances.
INVESTMENT TAX CONCESSIONS
In order to use investment equity in a tax savvy way, it pays to have an accountant who is a property expert.
A good accountant can fill you in on the tax rules regarding investment properties. They can also suggest the best ways of maximising your tax effectiveness.
For example, it may be better to avoid using investment equity to pay down a principle place of residence (PPOR) from a tax perspective.
This is because you need to pay interest on any equity you withdraw. However, if you reinvest that money into an investment property, the interest is generally tax deductible.
It’s important that equity is different from the proceeds of a sale. If you were to develop and flip a property for a cash profit, then this would be a good way to pay down personal debt. However you need to know the tax implication of doing so such that you consider capital gains tax and any other costs from selling.
Your accountant may suggest that it would be better not to use investment equity to pay down a principle place of residence (PPOR) from a tax perspective.
This piece of advice may save you a lot when it comes to tax time.
It’s important that equity is different from the proceeds of a sale. If you were to develop and flip a property for a cash profit, then this would be a good way to pay down personal debt.
USING EQUITY TO PAY OFF INVESTMENT PROPERTIES
Nathan says, he has heard of others who use the income from their investment properties to pay off their PPOR, while using equity to pay down the debt from their investment properties.
Finding out what you can and can’t do in terms of tax and other accounting issues is an essential step in mapping out a property investment strategy.
If you have any personal tax and property questions then we recommend speaking with OnePath Accountants.