Hey Experts, I am trying to find the answer to a question but still am not clear or have a definitive answer. It is likely I am not explaining myself correctly so I will try to be as clear as possible. I am trying to understand and determine if the following scenario would result in loan contamination. You have no PPOR You have a IP1 with a loan amount of 200k. You refinance the loan and at the same time get access to an additional 50k of equity. You do not get a split loan and at the time of settlement the lender puts the additional 50k into the offset linked to IP1 loan. Now at this stage you can claim an interest deduction on the 200k, the 50k you obviously cannot. So now the tricky part, say you have 40k in savings and since you have no PPOR debt the best place would seem to be the offset so you place it in there. Now from my understanding this is loan contamination, you have mixed "potentially" deductible debt with non deductible debt. You can now claim interest on 160k. But this is where I get unsure. What happens if the 90k in the offset never falls below 50k? Meaning in essence you never touch the 50k of loaned debucticle debt, you only spent your personal savings. Eventually you buy IP2 with 50k from the offset. So would this 50k now be deductible or contaminated? I mean in the eyes of the ATO can they see 50k went in at settlement, a lot of transactions then took place but none that went below 50k and that was then eventually used for a deposit?