One of the most powerful tools in financial circles is the ability to obtain taxable deductions for money spent on investing.
A tool which we use at New Financial Solutions is the tool by which we obtain a tax deduction on the interest you pay on your home mortgage.
One thing I must say first is this is not tax advice and you should always obtain professional tax advice before implementing any tax minimisation scheme.
Loan interest on an investment is deemed to be an expense to the operation of the investment and therefore is tax deductible.
Debt recycling is a method in which your home loan is setup so that you can redraw an amount upto 80% of the value of your home, which is then invested in an income producing asset.
As the investment pays an income, the income is deposited onto the home loan, the portion being not of the investment loan. You only pay the interest on the investment portion of the loan and all repayments are made on the non-deductible portion of the mortgage.
This reduces the amount owed on the loan which interest is paid but not tax deductible. Every six months a redraw is conducted upto the predetermined amount previously and the funds are invested in an income producing investment.
Doing this increases the amount of the loan which has deductible interest and lowers the amount which is not deductible.
Eventually you convert (recycle) Â the whole mortgage on your home from a non-deductible loan, whereby no interest is deductible to the point where all the interest paid on the home mortgage is deductible.
Plus, the bonus is an income producing asset which accelerates the payment of the mortgage, thus the mortgage is paid off in a shorter time.If you have any questions or wish to discuss this matter further please contact me.