Deductibility of deposit interest from offset

Hi All,

I'm a long time lurker first time poster and am going through my first purchase of an investment property in Brisbane.

I have some funds in my PPOR offset which I have already used to pay a deposit on an IP ($53k). I am in the process of splitting my PPOR loan ($280k initially into $200k and $80k for the IP) in order to use the $80k of funds for the deposit and all initial costs (eg. stamp duty, conveyancing, transfer etc).

If my understanding is correct, the interest on the split loan should be tax deductible as it's purpose is for the purchase of the investment property.

However given that I have already paid the deposit using funds from my offset and settlement only occurs on the 5/06/15, to ensure the interest on the deposit is deductible should I:

1. Pay the deposit money again from the funds in the split loan and then ask for a refund for the first deposit paid from the REA.


2. Once the split loan is set up, just transfer the deposit amount from the split loan to the offset to "reimburse" the deposit paid from the offset.


3. Pay off and redraw the deposit amount from my PPOR loan.

Basically what I'm getting at is, do I need to re-pay the deposit money again to show the ATO the direct link? Or am I able to just transfer the money back into my offset from the split loan and the interest will still remain deductible?

Apologies, I know I should seek specific accounting advice, but due to the timing of settlement I want to know if I'm heading in the right direction.
Some points
It is not just the purpose but the use the borrowed funds are put to.
1 may work depending how you do it.
2 won?t work
3 won?t work
You need to borrow to invest to be able to claim interest. Reimbursing doesn?t change the use.