PPOR, Offset vs Redraw

I know on an IP that you should go for offset to keep the debt deductable. But on your PPOR is there any advantages of using on offset account over a redraw?
 
I believe there is, expecially if you want to make it an IP down track.

My understanding is that if you want to turn your PPOR into an IP down the track you cannot redraw the excess funds to use to buy a new PPOR and then claim the interest against the old PPOR(now an IP) as it was directed to a non deductable asset.
I believe if you put in an offset account you can use for non deductable asset and the amount owing on the original PPOR(now an IP) is deductable as you have not redrawn it, but you had the same interest saving effect as paying mortgage in advance while it was your PPOR(assuming 100% offset)

Hope this makes sense, this is what i was told by my accountant, obviously check with yours, usual disclaimers apply.
 
It depends on whether you plan on keeping your PPOR as a PPOR forever or eventually turning it into an IP.

We made the mistake of going with the redraw, but now realise that we will want to upgrade in the near future. Unfortunately, we have no already 'contaminated' our loan significantly, so now rather then keeping this place as an IP when we upgrade, it may make more financial sense to sell and buy a different property as an investment... I will have to run the figures on that in a few years when we do upgrade.
 
Offset for the reasons already mentioned. Even if you have no plans for a PPOR to IP conversion.

You dont plan to crash the car, but most of us wear the seatbely anyway !


There wouldnt be many products why a redraw would be better in terms of other things like rate etc, unless the loan is smallish

ta
rolf
 
Thanks for the fast replies.
The loan is small.

I just thought of one thing, if I redraw to purchase shares/property, wouldn't that make part of the interest deductible as it's been used for an income producing asset? However with an offset it wouldn't as it never paid down the loan...

I know lots of this stuff has been posted before, which I'm reading now, I'm just trying to get my head around it all....
 
If you redrew to fund income producing assets it shouldnt be an issue tax wise. The tax department cares much more of what the money is used for rather than where it comes from.
 
i would say it makes more sense to have an offset for your ppor than an ip. on your ppor, the offset is reducing your non-deductible debt, while remaining available for other things. offsetting your ip reduces your deductible debt, reducicing your allowable deductions. but if all you have is ips, then offsetting is a better option still, because it enables you to move this money to offset the ppor in the future.
 
Or get a 'portable' PPOR loan and IF you move to a newer PPOR and turn the first PPOR into an IP just get a new IP loan for it.

Costs ~$300 to move the portable loan to a new property from memory.
 
I would vote for the offset.

That way your funds are available at any time you choose, and in whatever manner you choose.
Marg
 
Hiya jazza

Thats a good back up plan if we are replacing like for like debt. Should not be relied upon perhaps as a strategy ? Some would argue that an apportionment of the previous personal debt should be applied to the new IP secured loan, thats more of an acctant question though.


ta
rolf
 
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