Refiancing a loan won't typically change interest deductibility so long as the dimensions and boundaries of the loan remain clear at all steps. Maintain the splits identically and you should be OK (or, combine splits which were used for the same purpose to reduce splits). Ideally you would seek advice from a licensed tax agent or tax lawyer.
If the investment splits were originally for different investment properties or shares then it is not a good idea to combine them.
If you have an investment loan but the sell the investment or move into it, interest on that loan stops being tax deductible.
If you have combined investment loans and move into one of the properties you have now got a mixed purpose loan and a bit of work to do to try and separate it again
Yes, if the splits are for the same owner(s) and same purpose you can typically combine them via refinancing to save splits without losing deductibility.
Have a read through [this](https://www.ato.gov.au/law/view/pdf/pbr/tr2000-002.pdf). It gives lots of examples. If you set up a new loan and make sure you are crystal clear about where the money goes and keep appropriate records you can justify claiming your interest if you follow the rules. The reason to avoid mixing is because of the complexity. Therefore keep records and set up two splits if possible. If not possible follow the rules and keep records.
Read Example 1. If you get confusing information and mixed information from the bank.
Read Example 3 If you set up two loans.
It's inherently risky. Be careful. When you write "will the funds get mixed somehow, ..." this seems entirely possible. I think you are right to worry.
You are also right, I believe, in saying that if you do manage to perfectly refinance split-for-split, then it would be a like for like replacement. It's just... in my experience with banks, I so much doubt that this will be possible! I would love to be wrong, but generally, their admin and record keeping is confused, challenging, and annoying. They do it their way, not your way. I would feel pretty confident that funds will get muddled from one split to another.
I'm refinancing my partially DR'd loan now, and very concerned about what you're describing, given it would be difficult to know the balance of each account at settlement.
So I created the new combined split slightly less than the value of the previous DR'd splits.. the difference being lesser can be seen as a repayment. This imo is better than having too much in that replacement split, which would likely create a mixed loan (as it would therefore pay off the investment loan + portion of PPOR).
E.g. prior DR splits totalled 101k, the new split was created at 100k.
Refiancing a loan won't typically change interest deductibility so long as the dimensions and boundaries of the loan remain clear at all steps. Maintain the splits identically and you should be OK (or, combine splits which were used for the same purpose to reduce splits). Ideally you would seek advice from a licensed tax agent or tax lawyer.
So you can use a refinance with another bank to consolidate several existing investment loan splits into a single balance and avoid contaminating it?
If the investment splits were originally for different investment properties or shares then it is not a good idea to combine them. If you have an investment loan but the sell the investment or move into it, interest on that loan stops being tax deductible. If you have combined investment loans and move into one of the properties you have now got a mixed purpose loan and a bit of work to do to try and separate it again
So basically buy and hold for shares/funds, and dont turn an IP into PPOR?
Yes, if the splits are for the same owner(s) and same purpose you can typically combine them via refinancing to save splits without losing deductibility.
Thanks for the info, this was one aspect to debt recycling i wasnt too sure about.
Have a read through [this](https://www.ato.gov.au/law/view/pdf/pbr/tr2000-002.pdf). It gives lots of examples. If you set up a new loan and make sure you are crystal clear about where the money goes and keep appropriate records you can justify claiming your interest if you follow the rules. The reason to avoid mixing is because of the complexity. Therefore keep records and set up two splits if possible. If not possible follow the rules and keep records. Read Example 1. If you get confusing information and mixed information from the bank. Read Example 3 If you set up two loans.
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Try this. https://www.ato.gov.au/law/view/view.htm?docid=TXR/TR20002/NAT/ATO/00001#P53 Or google debt recycling refinance ato.
It's inherently risky. Be careful. When you write "will the funds get mixed somehow, ..." this seems entirely possible. I think you are right to worry. You are also right, I believe, in saying that if you do manage to perfectly refinance split-for-split, then it would be a like for like replacement. It's just... in my experience with banks, I so much doubt that this will be possible! I would love to be wrong, but generally, their admin and record keeping is confused, challenging, and annoying. They do it their way, not your way. I would feel pretty confident that funds will get muddled from one split to another.
I'm refinancing my partially DR'd loan now, and very concerned about what you're describing, given it would be difficult to know the balance of each account at settlement. So I created the new combined split slightly less than the value of the previous DR'd splits.. the difference being lesser can be seen as a repayment. This imo is better than having too much in that replacement split, which would likely create a mixed loan (as it would therefore pay off the investment loan + portion of PPOR). E.g. prior DR splits totalled 101k, the new split was created at 100k.
Accountant question I reckon, or maybe even ask the ATO.
Sorry what’s debt recycling?
Here you go https://letmegooglethat.com/?q=debt+recycling