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A contaminated loan is one where it's part deductible part non-deductible. To claim interest on the loan, you need to know how much of the loan is still tax deductible and only claim interest on that part. It can be rectified by splitting the loan into two parts along the same portions and...

P&I or I/O has no effect on contamination of the loan. Contamination is primarily dependent on what you use the money in the redraw facility of the loan for. If the loan is original for personal use (buying your own home), further drawings should also be for personal use. If the original...

You're kind of focusing on two different things here. The first is P&I vs I/O, the second is the use of an offset account vs redraw. You're on the right track for the deductions, but the reasons are a bit misdirected. I/O means your loan doesn't reduce over time because you're only paying the...