The hidden tax cost of using property equity for personal spending
Releasing equity for holidays, cars or lifestyle spending is legal and common, but if the loan is structured incorrectly it can quietly wipe out thousands of dollars a year in tax deductions.
Funding that holiday or round-Australia trip from property equity is not unusual but can have ongoing negative tax implications. (Image source: Philip Schubert/Shutterstock.com + API Magazine)
Releasing equity from an Australian investment property for personal spending is a common and legitimate financial decision.
In many cases, the property has increased in value, the loan balance has been reduced over time, and rental income comfortably services the debt. Using equity to fund holidays, upgrade a vehicle, or purchase a caravan can appear straightforward from a banking perspective.
While the decision itself may be simple, the tax c…
