Debt recycle non deductible to deductible

Perhaps to make it easier/clearer on you/ your accountant and ATO going forward - for the loan you are intending to debt recycle - ask your bank to formally split the loan into 2 separate loans as a first step in the process:

So 1 loan of $100k becomes 2 loans $50k each.

Pay down one loan to zero, and now use funds for your income producing activities (and tax deductible interest).

Much cleaner than needing to keep tabs on with proportions of a single loan are deductible/non-deductible.

Tom, just so i understand it right....you are suggesting divide the 100K into two separate loans (50,50)...use your offset's 50k to pay off one of the loan and then re borrow it again..

in this case can you borrow all of your 50K back....or only portion of it....
 
I no longer have a redraw account when I rifinanced it was changed from a loan with a redraw to now a loan with a offset account only, My cash savings which was once in a redraw was automatically parked in offset when loan was rifinanced.
Cheers.

How did you manage to do this. i always thought on a refinance bank will consolidate your loan taking redraw amount in account and release the balance.....

even looking at this approach wouldn't it be better with your original redraw arrangement in that way whenever you need money for IP expenses you can withdraw it from your redraw given your lender allows Bpay or EFT transfer straight from redraw. every redraw is the new borrowings and use of that money defies tax deductibility.

Unfortunately, there is a grey area when you are parking your borrowed funds in some sort of savings account (e.g. Offset, every day account, even though it is new) before using it for investment purposes. I've not find it defined clearly anywhere in black and white yet but you will find even accountants would have separate views on this. some suggest as long as you can trace the journey of the money (without mixing it with personal money) it's ok....while other suggest not to do it at all.

some of the lenders don't offer straight transactions from redraw so consumer has no choice but to park it somewhere....I think it's overkill and about time ATO should clarify on this arrangement....

Keep us posted on your accountant's thoughts...
 
hey SO805

So after professional advice and also thanks to the forum members for advice also,

The plan is only 1 of my investment properties had a redraw account all others where set up correctly to begin with offset/IO,

To fix my error with this one its going to be a slow process but my lender allows me to pull money straight out of this account without the need of transferring to another one of my accounts and then transfer for expenses... So I will be using the money in this account to directly pay investment related expense ONLY, and keeping STRICT records excel ect to back my self up.

thanks...
 
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