- Capital Gains Tax
Capital gains tax (CGT) is a tax on the profit you make from selling an asset, such as a property. If you refinance your home loan and use the additional funds for purposes other than renovating or improving the property, you may be subject to CGT. This is because the additional funds are considered income and are subject to tax. However, if you use the funds for renovations or improvements, you may be able to claim an exemption or reduction in CGT.
- Deductible Interest
When you refinance your home loan, you may be able to claim tax deductions on the interest you pay on the loan. This is because the interest is considered a deductible expense if it’s used to generate income, such as rental income from an investment property. However, if you use the additional funds for personal expenses, such as a holiday or a new car, the interest on that portion of the loan is not deductible.
- Loan Fees and Charges
When you refinance your home loan, you may be charged fees and charges by the lender. These fees may include application fees, valuation fees, and legal fees. These fees may be tax-deductible over the life of the loan. However, it’s important to note that some fees, such as mortgage discharge fees, are not tax-deductible.
- Stamp Duty
In Australia, stamp duty is a tax on property transactions, including the transfer of ownership or the registration of a mortgage. When you refinance your home loan, you may be required to pay stamp duty on the new loan. The amount of stamp duty varies depending on the state or territory in which you live. However, if you refinance with the same lender, you may be able to avoid paying stamp duty.
- Goods and Services Tax
Goods and Services Tax (GST) is a tax on most goods and services sold in Australia. When you refinance your home loan, you may be charged GST on the lender’s fees and charges. However, if you use the additional funds for investment purposes, such as purchasing an investment property, you may be able to claim a credit for the GST paid.