Manufacturing a deductible PPOR loan

[coolcup69]

Let's say I have a PPOR loan of $100 and I have $100 in an offset account against this loan. I would like to buy $100 of shares on the market.

I could use $100 in the offset to repay the PPOR loan, then create a split and redraw $100 to fund my share purchases. The interest on the PPOR split to buy the shares would then be deductible. As I save money month to month I could fill up the offset with savings to save interest. If I saw further value in the share market, I could keep using the offset cash to fund share purchases and the interest on the loan would be deductible.

Is this correct or have I missed something? If correct, then over time I could convert my entire PPOR debt into deductible debt and put money into the offset and withdraw it without worry about the "purpose" of those transfers - as long as the original redraw from the loan was for an "investment purpose".

Just checking to see if I have got this correct!!!

 

[Terry_w]

Let's say I have a PPOR loan of $100 and I have $100 in an offset account against this loan. I would like to buy $100 of shares on the market.

I could use $100 in the offset to repay the PPOR loan, then create a split and redraw $100 to fund my share purchases. The interest on the PPOR split to buy the shares would then be deductible. As I save money month to month I could fill up the offset with savings to save interest. If I saw further value in the share market, I could keep using the offset cash to fund share purchases and the interest on the loan would be deductible.

Is this correct or have I missed something? If correct, then over time I could convert my entire PPOR debt into deductible debt and put money into the offset and withdraw it without worry about the "purpose" of those transfers - as long as the original redraw from the loan was for an "investment purpose".

Just checking to see if I have got this correct!!!

You are borrowing to buy share, so the interest will likely be deductible - depending on the shares.

Cash in the offset account won't affect the deductibility.

But if you saying you will be borrowing and putting it in the offse then the interest won't be deductible.

 

[coolcup69]

But if you saying you will be borrowing and putting it in the offse then the interest won't be deductible.

Thank you Terry. What if I borrow and transfer the funds to a broking account which I then use to acquire shares (over the following few days)? Is the law slightly flexible in that regard?

 

[Paul@PFI]

Yes you can. Carefully choose which shares you buy however. Shares which don't pays divs are a concern. eg : Low cap miners and penny dreadfuls. The interest deductibility requires an expectation of earning assessable income NOT profits from sale of the shares. Also there can be concerns if you buy / sell on a regular basis that your activity is a trading activity intended to derive ordinary income so "capital gains" may not arise.

Then there is the issue of how you use the loan. If you sell shares and don't repay the loan the interest deductibility ceases.

With so many complexities personal advice is always a must.

 

[Terry_w]

Thank you Terry. What if I borrow and transfer the funds to a broking account which I then use to acquire shares (over the following few days)? Is the law slightly flexible in that regard?

A brokerage account is just a savings account. If the borrowed funds mix with cash there could be issues. Seek specific advice.

 

[Rob G.]

The interest on the PPOR split to buy the shares would then be deductible. As I save money month to month I could fill up the offset with savings to save interest. If I saw further value in the share market, I could keep using the offset cash to fund share purchases and the interest on the loan would be deductible.

Which sub-account/split account is the offset against ?

You are planning on using savings in the offset account to fund further share purchases ?

Does not make sense to me.