deductability of parking LOC funds

[eggnog]

Is the interest on a LOC deductable if the LOC money were drawn down and placed in an offset account. ie: in the following scenario.

Bob has $100k available through LOC on IP1 from Westpac but scared bank might reduce this facility because of credit crisis . So Bob draws down LOC and places money in offset account for IP2 held through NAB. Would the interest still be deductable from IP1 LOC loan.

 

[Rolf Latham]

yes

but only to the extent of the savings in interest generated on the offset acct

ta
rolf

 

[Dunsborough]

cashflow

have you thought of parking the money in aaa blue chip fully franked shares, that way you have money at arms length from bank and done right will get good return. Not without risks or sleepless nights though, depends on sanf

cheers

 

[redsquash]

yes

but only to the extent of the savings in interest generated on the offset acct

ta
rolf

I dont think that's correct .
The payment into the offset account, from the LOC, are funds used to pay off a business debt, ie the investment property mortgage amount.
Therefore The full amount of interest from the LOC would be deductible
The amount of savings is irrelevant from a tax point of view.
Please shoot me down if Iam wrong

 

[triton07]

Would this one be a similar situation?

Or with LOC is OK?

http://www.somersoft.com/forums/showthread.php?t=42261


Cheers
George