Was having a chat with a friend working in medical profession today. It stunned me the way she structured her loan.
She used to own a PPOR which has now been turned into an IP. Associated loan was a $600k variable with offset when she bought it. Around 20 months ago, she did a top-up to 690k when it's turned into IP, and the extra 90k proceed has sit in that offset account ever since. The problem is she has continued using this offset account for her personal income and expense (as many of her existing direct credit and debit were set up against that account). If my thought is correct, the proceed of the 90k top-up is contaminated, and interest on it is no longer deductible. Here are my questions:
1. Is there a way for damage control as it surely would affect her tax return in the last two years?
2. How to repair the loan structure going forward?
P.S Ironically, she and I use the same accountant, and I know he's not knowledgeable when it comes to property tax advice. This forum and my broker have always been more helpful when it come to pointing out tax problems.
She used to own a PPOR which has now been turned into an IP. Associated loan was a $600k variable with offset when she bought it. Around 20 months ago, she did a top-up to 690k when it's turned into IP, and the extra 90k proceed has sit in that offset account ever since. The problem is she has continued using this offset account for her personal income and expense (as many of her existing direct credit and debit were set up against that account). If my thought is correct, the proceed of the 90k top-up is contaminated, and interest on it is no longer deductible. Here are my questions:
1. Is there a way for damage control as it surely would affect her tax return in the last two years?
2. How to repair the loan structure going forward?
P.S Ironically, she and I use the same accountant, and I know he's not knowledgeable when it comes to property tax advice. This forum and my broker have always been more helpful when it come to pointing out tax problems.