Negative gearing clarification

I am about to purchase a house to live in for the next 18 months and then will be moving interstate for a year and then returning to live in the house. I also have a sizable deposit (approx. 70% of the purchase price) and was planning to take out a loan for 80% of the purchase price and use an offset account to minimise interest payments while I am living there. When I move interstate I was hoping to move my money out of the offset account to maximise the benefit of negative gearing. When I return I would return my money to the offset account.

Is the above plan legitimate?

Another question, can you negative gear for the period your house is vacant waiting for a suitable tenant?

Cheers
 
Yes. You can move money in and out of the offset account without it affecting the loan. It's when people try to redraw money out of their loan (not a separate account) that creates issues.

Don't call it negative gearing. Call it "claiming a tax deduction".

If you have taken action to find a suitable tenant - ie, hired a property manager, advertised the property, etc, then you should be able to claim the property as an investment property. You can't just vacate it and leave it empty and then say: "Hey, the house was waiting for a suitable tenant, but nobody turned up", and claim all the costs. :p
 
Yes, it is legitimate, but ask yourself is there a real benefit to doing this? If you move the money out of the offset then, yes, you will get a bigger tax deduction, but you will also have to pay tax on any interest earnt from the funds while they are in another account. Sitting in the offset account you don't earn interest, only minimise the amount of interest on the loan.
 
Yes, it is legitimate, but ask yourself is there a real benefit to doing this? If you move the money out of the offset then, yes, you will get a bigger tax deduction, but you will also have to pay tax on any interest earnt from the funds while they are in another account. Sitting in the offset account you don't earn interest, only minimise the amount of interest on the loan.

Good point...thanks for clarifying this for me :D

Thanks for the other points too guys!
 
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