Home Forums Money matters Redrawing on mortgage to fund writing

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    • Total posts: 2

    Hi all,
    I’ve taken 6 months off work to write a book. I am planning on using some of the equity in our home loan to pay for the living expenses over the period (far cheaper then taking a personal loan). Given that this will likely result in future income from book sales (not much, but some) should I be structuring the withdraws from the loan in any particular way to maximise future deductions etc?

    Peter – FS Administrator
    • Total posts: 1,889

    Hi Mark,
    Welcome to Flying Solo and thanks for joining the discussions.
    Congratulations on diving in and attacking your book. I imagine it would take discipline to shift from full-time work to full-time writing!
    It’s a good question you ask about deductions for future income and definitely not my area unfortunately, but I expect one of our resident financial experts may have some insights to add.
    All the best with the project!!

    • Total posts: 17

    This advice is general in nature.

    I am assuming your homeloan is PPOR not an investment property. When you draw equity out, under the purpose rule, if it is for investment purposes you ‘may’ be able to claim deductions on the addition interest of the loan. However you don’t seem to be funding an investment, you are funding your living expenses, and your book writing, unless you are already a published author, may be considered a hobby, so prima faci, you won’t meet the purpose rule for any deductions.

    One option you can explore~
    You may have to consider setting up your pty ltd first, draw out your equity and put a directors loan to the company. The company pays you a wage, and when the company does profit from your book sales, deduct the cost/loss during the setup/preliminary phase.

    Depending on your current redraw facility and whether you have an off set account, you should consider speaking with your broker to link your company account as an offset account for your homeloan so that you are not paying interest on the unused loan portion.

    Without knowing too much about your circumstances, I need to stress that there may be many ways to achieve what you want to achieve, my suggestion is only one way, that may not be the best, and your circumstances (unknown to me) will determine whether or not it is suitable. You should always speak with a Financial Planner or Accountant prior to setting up legal structures and entities with the view of claiming taxation credits in the future, as the way it is structured and the way the $$ flows will determine whether it would be claimable in the future.

    Good luck with the book.

    • Total posts: 2

    Thanks so much Sophie for the advice. I am already published, so this would be a second book.

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