It appears there are a few here who are not convinced you CAN NOT draw down or by some other means access the equity in an existing main residence, use this equity to purchase a new main residence, and then use the oringinal residence as an investment property and claim a deduction on the increased loan balance
I have state this interest would not be deductible under s 8-1 of the ITAA 1997
and that it could be even in breach of the anti avoidance provisions of Part 4A
Clearly quoting actual legislation is either not good enough or to complex for some
So
Rather than look at the ATO legal data base, which I will admit can be heavy going, I though I would have a look at the ATO plain english section for individuals
and look at what it states on this subject
Example: Interest incurred on a mortgage for a new home
Zac and Lucy take out a $400,000 loan secured against their existing property to purchase a new home on the other side of town.
Rather than sell their previous home they decide to rent it out.
They have a mortgage of $25,000 remaining on their existing home which is added to the $400,000 loan under a loan facility with sub-accounts – that is, the two loans are managed separately but are secured by the one property.
Zac and Lucy can claim an interest deduction against the $25,000 loan for their previous home, as it is now rented out.
They cannot claim an interest deduction against the $400,000 loan used to purchase their new home as it is not being used to produce income even though the loan is secured against their rental property.
And here is the link http://www.ato.gov.au/individuals/content.asp?doc=/content/00113233.htm
Now maybe Those who still believe differently may like to come up with very specific details of how they believe a person could get around what I have been stating and what the ATO very clearly state you can not do
