Also you have to remember the ATO is not going to be ruthless and they will probably allow a deduction in most cases. I have a friend who was audited and he was one of those who transfer money from a loan increase into a savings account, and intermingles it too, and the ATO didn't pick up on it. It all depends on the situation.
But it s better to be safe and do things properly.
The best way, I think, is that any loan increase should be retained in the loan. When the money is needed a cheque drawn on this account should be used. This is why a LOC is good.
If this is not possible or practical then set up a new account with absolutely no funds in it and then transfer the money there before writing a cheque. However, this method may result in the loss of deduction of interest - but at least it will give you a stronger case to argue for the tracing of funds from the original borrowings.