Another Offset redraw question. Slightly different

[Risky Business]

Thinkers,

This has been on my mind for a little while but I haven't done any real reading to find an answer. Sorry for not self answering.

We are with CBA. We recently fixed a series of our home loans. This places restrictions on me redrawing any extra repayments previously made.

Only one old home loan has extra repayments having previously been made. In hindsight, whilst the loan was on variable, could I have extracted the extra repayment money from the home loan and sat it in a full transactional offset account linked to that one loan only. I would have had that offset account to only ever have that specific amount sitting there with no other transaction being completed.

It would have then been emergency money in case it was required. As I can't easily extract the money whilst the period is fixed. I am aware that spending this money would have contaminated this loan, and the loan would then only be partially deductible.

Putting aside whether this is a good source of emergency money. If I never 'spent' this money and merely extracted it out of the loan into a 100% offset, would this loan have remained 100% deductible?

Thanks for thinking.

 

[Terry_w]

Putting aside whether this is a good source of emergency money. If I never 'spent' this money and merely extracted it out of the loan into a 100% offset, would this loan have remained 100% deductible?

Thanks for thinking.

Whether the interest on the money extracted (= borrowed) would be deductible would depend on what you send the borrowed money on. If you were to never spend it then there would be no interest.

 

[Colin Rice]

Key phrase to remember/apply is "what is the purpose of these funds?"

If for investment use then should be tax deductible, if for non investment use then will not be tax deductible.

 

[Risky Business]

Thanks for replying guys.

I hear you Terry. I was thinking about it wrong. If no increased interest is claimed, then this transaction is not relevant.

And if I put it back in, the interest would be the same so no change again.

What about this one. I might have missed an opportunity to remove some cross collat. The option has long elapsed.

Both properties were IPs. I had the option to extract some extra repayments in one loan to pay down another loan. This reduction in one loan would have allowed me to remove the cross collat on that property. I baulked and missed the opportunity. From memory, the rates were similar/same. The effect would have been that one property had a reduced loan interest whilst the other was increased.

Would the loan that increased be 100% deductible if it paid down another IP? Or would that portion have been non deductible from then on?

Thanks again.