ARE EQUITY WITHDRAWALS TAX DEDUCTIBLE?

 

Many property investors take out equity from an existing investment in order to purchase their next property, but is this equity then subject to tax?

GETTING FINANCIAL ADVICE

It is important to have a detailed discussion with your accountant or tax agent about your investing strategies and what you are likely to be taxed on. OnePath Accountants are part of the Binvested Group and are experts at helping investors understand the workings of the Australian Taxation system.

RELEASING EQUITY

Let’s say you purchased a property for $200,000 with a 20% deposit of $40,000. After getting the property revalued at $250,000, you get an 80% lend of that at $200,000. You pay off the original $160,000 loan and you have $40,000 of that left over. If you choose to take out that $40,000 and use it as a deposit for another investment, you should be able to claim it against the tax on the new property. If you use the $40,000 for non-investment purposes, it is unlikely you could then claim that against tax.

SELLING TO ACCESS FUNDS

If you sold the property in order to release its equity, you would be subject to pay a capital gains tax.

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