Hi Aroon,
Early in April, I asked the tax office about having an offset account on an IP loan. The advice given to me was: that I can not jut get mony in and out of the offset account without affecting mnay tax deductibility. Example:
1.If balance of my IP loan is 100K and balance of my offset accnt is 0, then the full interest for $100 K is deductible.
2. Using the IP loan balance above, and balance of offset accnt is $10K, then the interets deduction is for $90K.
3. But If I pulled out the $10K from the offset accnt, and the IP loan balance goes back to $100K, I have to apportion the interest that I use for IP and for private use (which is interets from the $10K)
I argued long and hard with her, but she said: THAT WAS IT! I thought she may have misunderstood the meaning of off-set account; but she was very clear she understood it perfectly.
Can anyone let me know what the current rule is for offset account on IP loan?
Thanks