Mixed Purpose Loan
A single loan used for both investment and personal purposes — splits the interest deduction.
Definition
A mixed purpose loan is a single borrowing used for more than one purpose — e.g., an investment property purchase plus a personal car, or a redraw from an investment loan used for a holiday. Under TR 2000/2, the interest must be apportioned: only the portion attributable to the income-producing purpose is deductible. Loan 'tainting' occurs when personal draws from an investment loan create a permanent non-deductible component.
You have a $500,000 investment loan. You redraw $30,000 for a holiday. Now only $470,000/$500,000 = 94% of the interest is deductible. On $25,000/year interest, you lose $1,500/year in deductions.
Related reading
Related terms
TR 2000/2 Interest Deductibility
ATO ruling on when loan interest is deductible — purpose of the loan matters, not what secures it.
Offset vs Redraw
Offset preserves your deduction; redraw can taint it. They are not the same.
Negative Gearing
When your property costs exceed rental income — and you claim the loss against other income.
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