jimmijamz
As Pat said, if you put it in the LOC which has been set up for investment purposes and then subsequently withdraw $ for private purposes, then interest is not deductible on the funds used for private purposes.
However, if you put it in the offset a/c, there is no effect on deductibility of the interest. As per Pat's example: if you have $200,000 IP loan and $30,000 in the offset a/c, you will only be charged interest on $170,000. If you withdraw the $30,000 from the offset a/c for private use, then interest is charged on the full balance of the IP loan, as there are no longer any funds if the offset a/c. Note that there is no mixing of private and investment funds because the balance of the IP loan has not changed - just the amount of interest that has been charged.
If you have an LOC which is for private purposes only, then it is OK to put your salary into it, put private expenses on credit card and pay the card off each month. But you should keep IP expenses and private expenses completely separate, or things get very messy - and very expensive to sort out.
I hope this helps to clarify things.
Cheers
LynnH
As Pat said, if you put it in the LOC which has been set up for investment purposes and then subsequently withdraw $ for private purposes, then interest is not deductible on the funds used for private purposes.
However, if you put it in the offset a/c, there is no effect on deductibility of the interest. As per Pat's example: if you have $200,000 IP loan and $30,000 in the offset a/c, you will only be charged interest on $170,000. If you withdraw the $30,000 from the offset a/c for private use, then interest is charged on the full balance of the IP loan, as there are no longer any funds if the offset a/c. Note that there is no mixing of private and investment funds because the balance of the IP loan has not changed - just the amount of interest that has been charged.
If you have an LOC which is for private purposes only, then it is OK to put your salary into it, put private expenses on credit card and pay the card off each month. But you should keep IP expenses and private expenses completely separate, or things get very messy - and very expensive to sort out.
I hope this helps to clarify things.
Cheers
LynnH
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