Most of us are very familiar with the standard debt recycling strategy when we have some non-deductible debt, usually in a PPOR. But I'm curious if anybody adopts the strategy of capitalising costs into a loan account that has a 100% offset, just for a rainy day.
Let's say that you have a debt-free PPoR, but $1m of IP debt. Set up a new facility with a 100% offset. Instead of paying the interest on the IP, capitalise the interest into the new facility and put the money into the offset instead. There's no additional cost and your net debt stays the same, but you now have a nice pot of tax-deductible debt on call whenever you need it.
This is hardly an original thought, but it doesn't seem to get as much mention as the standard PPOR to IP recycling strategy.
Pushing the boundaries too far perhaps?
Cheers
Jonathon
Let's say that you have a debt-free PPoR, but $1m of IP debt. Set up a new facility with a 100% offset. Instead of paying the interest on the IP, capitalise the interest into the new facility and put the money into the offset instead. There's no additional cost and your net debt stays the same, but you now have a nice pot of tax-deductible debt on call whenever you need it.
This is hardly an original thought, but it doesn't seem to get as much mention as the standard PPOR to IP recycling strategy.
Pushing the boundaries too far perhaps?
Cheers
Jonathon
