Am I contaminating my investment loan?

[whimsical75]

I have some deductable and non-deductable loans, both with offset accounts. The non-deductable loan has more money in the offset account than the loan amount so is wasted sitting there (will be there for up to 6 months as it is being used to pay a builder for our new house after we sold our previous house).

The deductable investment loan has a small amount of money in the offset account which the bank fees and interest are being drawn from.

Question is - can I transfer some of the money from the non-deductable offset account to the deductable offset account for a period and then transfer it back? I'm not touching the investment loan itself so I don't think it's a problem, but I'm not 100% sure if I can mix up the offset account?

 

[spludgey]

As long as the money sitting in the investment offset weren't borrowed for investment purposes, it should be fine.

Get someone else to confirm, but that's my understanding.

 

[Brady]

As Spludgey said shouldn't be any problems at all, as long as the funds in the offset accounts aren't borrowed funds. If they're your cash/savings then it's your money no issues in transfering between your own savings. It's when you redraw that it becomes a problem.

 

[whimsical75]

OK. So the investment offset does contain borrowed funds. What if I pay off the investment loan with the money in that offset (say it's $20k for arguments sake) which would make the investment loan smaller and its offset account nil. Then I can transfer the money across? When at some stage I use up all my fund in my offset, then I should be able to redraw the $20k back out of my investment loan into my empty offset (if I wanted to)?

 

[Paul@PFI]

I have some deductable and non-deductable loans, both with offset accounts. The non-deductable loan has more money in the offset account than the loan amount so is wasted sitting there (will be there for up to 6 months as it is being used to pay a builder for our new house after we sold our previous house).

The deductable investment loan has a small amount of money in the offset account which the bank fees and interest are being drawn from.

Question is - can I transfer some of the money from the non-deductable offset account to the deductable offset account for a period and then transfer it back? I'm not touching the investment loan itself so I don't think it's a problem, but I'm not 100% sure if I can mix up the offset account?

Yes you can. It doesn't actually change the deductible loan balance. It merely shifts the offset from wasted to reduce the deductible loan AFTER the full non-deductible offset has been used.

 

[Terry_w]

Question is - can I transfer some of the money from the non-deductable offset account to the deductable offset account for a period and then transfer it back? I'm not touching the investment loan itself so I don't think it's a problem, but I'm not 100% sure if I can mix up the offset account?

An offset account is just a savings account so if it is cash in the savings account it should effect the deductibility of interest on the loan - except the interest will rise and fall depending on the balance of the offset.

 

[Terry_w]

OK. So the investment offset does contain borrowed funds. What if I pay off the investment loan with the money in that offset (say it's $20k for arguments sake) which would make the investment loan smaller and its offset account nil. Then I can transfer the money across? When at some stage I use up all my fund in my offset, then I should be able to redraw the $20k back out of my investment loan into my empty offset (if I wanted to)?

If the offset contains borrowed funds then it is a different story. firstly I would advise against borrowing and parking in an offset. And then in this particular situation you would be moving boprrowed money around (assuming the interest is still deductible) so there will be tax issues.

 

[whimsical75]

Thanks for your assistance guys - very much appreciated!