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IP1 main loan gets paid off. IP1 needs to be securitised elsewhere in order to have IP1's title released at settlement. But obviously if you pay down the IP1 split loan, which is really a deposit for IP2, then you lose deductibility on those funds, which is undesirable. If there's a chance...

If you use it all to purchase another IP, then you should still have deductibility on all interest, but you have a problem in having mixed up funds for two different deductible purposes - IP1 and IP2. You should have the equity release portion - i.e. the funds in excess of what was used to...

I am not an expert, so hopefully Terry W can confirm, but if there were no other funds in the offset account, then I don't think there'd be a contamination issue. But what do you mean about moved into a redraw? That sounds more problematic than passing through the offset. What was the...

If it went directly from the loan account to the OTP vendor, without passing through the offset, then you probably don't have a problem. If it went into the offset first, however, you do have a problem.

If it passed through the offset, and mixed with other cash, then it won't be deductible. You'd have to take the extra you've drawn down, and transfer it directly to the vendor of an IP, in order for the "extra" to have deductible interest. Even in that situation, you should have separate loan...

The offset's not the problem, it's combining your original purchase loan with the increased equity that you've drawn, into one loan account, that's the problem. e.g. Buy for $400K, borrowing $320K > $320K loan, all interest deductible Property goes up to $500K, can borrow 80% or $400K > if you...

Because they have no knowledge of, or interest in, your taxation affairs. You have to be proactive and tell them how you want it set up.

Then you have a contamination problem.

Is the loan for a PPOR? If so, there's not a problem. If your loan account includes the funds you borrowed to purchase, plus the extra equity you've drawn, then you're contaminated.

Yes, if you're not using the equity pulled out for investment purposes. You need to have the extra that you pull out in a different loan account, if you want to retain deductibility of the interest on the IP loan.

Wouldn't there only be a problem if the situation was a *redraw*? If he's parked funds in the offset, he can use it for whatever he damn well likes and the interest on the $200K loan is always deductible. The interest on the extra $50K of the loan is never deductible, because it was never...