Best account set-up with split loan and redraw offset accounts

I am a new to property investing and this is my first post. Your help in account set-up is appreciated.

I have a PPOR loan with an online lender (loans.com.au) with $500K in loan. I have 200K in redraw offset account.

This is what I am thinking to do after reading various posts in somersoft. Please note that loans.com.au won't provide LOC but they can provide split loans.

Please correct me if there are any mistakes with the account setup or if the setup can improved


1) Draw down the PPOR loan to 300K using funds available 200K in redraw offset.

2) Secure a split investment loan using funds available in my PPOR of 200K with 200K in offset.

i.e., the loan set-up as below.

Loan 1 - PPOR - Loan 300K and Offset 0K.
Loan 2 - Investment Split Loan from the same lender- Loan 200K and redraw offset 200K.
Loan 3 - New 80% loan from another lender for the investment property.

Open two new zero fee savings accounts with NAB.
1) Account A - All income from the investment will be put into this account
2) Account B - All expenses for the investment properly will be drawn from this account

Ongoing actions

1) On a regular basis I move funds from "Loan 2" offset to Account B to service the property expenses.
2) Rent will be paid to Account A and I will move funds from Account A to Loan 1 offset or Loan 3.
 
Loan 1 - PPOR - Loan 300K and Offset 0K.
Loan 2 - Investment Split Loan from the same lender- Loan 200K and redraw offset 200K.
Loan 3 - New 80% loan from another lender for the investment property.

Open two new zero fee savings accounts with NAB.
1) Account A - All income from the investment will be put into this account
2) Account B - All expenses for the investment properly will be drawn from this account

Ongoing actions

1) On a regular basis I move funds from "Loan 2" offset to Account B to service the property expenses.
2) Rent will be paid to Account A and I will move funds from Account A to Loan 1 offset or Loan 3.

I don't think there's any reason to have the two NAB accounts. Simply run all this though the offset account on loan 1.
 
I don't think there's any reason to have the two NAB accounts. Simply run all this though the offset account on loan 1.

Thanks Peter

I thought of having two NAB accounts because loans.com.au offset accounts are 100 redraw offset accounts. I don't know redaw offset accounts are are real offset accounts like big banks
 
There's been some recent discussion on that in another thread regarding loans.com.au. The optimal scenario is if all money goes in and out of an offset against your non-deductable debt. Regardless, I don't think you'd really need two transaction accounts, but if it helps you to clarify in you mind how money is coming and going, that's fine too.
 
Bit confused. All the money going in and out to an offset of non-deductible debt? Ie, my non-deductable debt increases in a negative gearing scenario?

In most cases the rent won't be enough to offset the interest. Can I use the new split loan (200K) to pay the difference?

I read in some other thread that the rent can offset against the non-deductable debt and expenses can be paid from deductable debt.
 
What is a redraw offset account ?

Its either one or the other.

Or is it a badged bank product that is a redraw dressed up as an offset but is not from a tax point of view ?

Cheers,

Rob
 
I don't know what exactly is the technical difference.

loans.com.au provides an account that works like an offset account. They have even provided an Westpac linked ATM card to withdraw funds from it. But since they are not a bank, I think if I close my loan, redraw account also have to be closed. But tax point of view, I am not sure what is the difference.
 
Bit confused. All the money going in and out to an offset of non-deductible debt? Ie, my non-deductable debt increases in a negative gearing scenario?

In most cases the rent won't be enough to offset the interest. Can I use the new split loan (200K) to pay the difference?

I read in some other thread that the rent can offset against the non-deductable debt and expenses can be paid from deductable debt.

My general advice for most lenders is that all money should go into and out of an offset account against non-deductable debt. This works very nicely with most lenders. Dispite the question being asked on multiple occassions, there is still some question of the loans.com.au 'redraw offset' working the same way. You'll have to get advice from them.

No, you should not use the new split investment loan to pay the difference in your holding costs. Capitalising interest is not good and in most cases the ATO rejects your reasons for do it.

Some expenses (such as repairs and improvements) can be paid for from deductable debt in most cases, but interest expenses cannot be paid from deductable debt.

You should probably get tax advice specific to your situation for these questions.
 
If the investment is cashflow positive, you'll be generating a profit on the rental income. You'll likely pay a little extra tax every year. This is a good thing because it means you're making a profit.
 
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