PPOR with Offset, and investment

[Warren018]

Hi good people of Somersoft.

I have another technical question.

I have this situation, I have:
PPOR - which I live in, with a loan amount of 850 k. I have 850K even in the 100% offset account The reason I did this, because, I did not know if I was going to rent PPOR out later on, and can then use the money in the offset.

However, recently, I saw a property with a very attractive return. It cost 850 K even. At the moment, my PPOR repayment is zero due to the offset. However, if I use the money from the offset account to outright purchase the investment property. Would the interest on the PPOR be tax deductible?

Normally, I usually take up a new loan for a new property. However, this one would be considered as commercial with higher interest rate if I did so.

 

[Rolf Latham]

Not deductible since u are using savings

But

Can be made deductible in most cases with a little bit of loan fiddling and case notes

See your banker or broker and tax adviser

Ta

Rolf

 

[Jamie M]

I don't think it would be as the money is coming from your offset.

edit: and rolf beat me to it.

Cheers

Jamie

 

[Warren018]

re

thanks guys. I thought so. I was so close to make a non financial condition offer! I was going to press the send email button before my wife had a gut feeling that offset account is not redraw of home loan.

Hmm, I better talk to my accountant!

 

[jpcashflow]

Hi Warren,

Never rush into buying something and always talk your broker, accountant and solicitor.

The deal can wait...

Cheers

 

[Terry_w]

Hi good people of Somersoft.

I have another technical question.

I have this situation, I have:
PPOR - which I live in, with a loan amount of 850 k. I have 850K even in the 100% offset account The reason I did this, because, I did not know if I was going to rent PPOR out later on, and can then use the money in the offset.

However, recently, I saw a property with a very attractive return. It cost 850 K even. At the moment, my PPOR repayment is zero due to the offset. However, if I use the money from the offset account to outright purchase the investment property. Would the interest on the PPOR be tax deductible?

Normally, I usually take up a new loan for a new property. However, this one would be considered as commercial with higher interest rate if I did so.

You are a smart man to know the potential issue here. A non informed person would have paid cash for the new property and ended up with
$850,000 non deductible
$0 deductible loan

This has increased your deductions by about $40,000 per year potentially saving you $20,000 per year over the next 20 plus years.

 

[Warren018]

re

Thanks guys. But this time, its my wife who had this gut feeling. We neither of us are from financial background.

But will definately talk to my accountant and bank manager.

 

[CosmicTrevor]

Hi good people of Somersoft.

I have another technical question.

I have this situation, I have:
PPOR - which I live in, with a loan amount of 850 k. I have 850K even in the 100% offset account The reason I did this, because, I did not know if I was going to rent PPOR out later on, and can then use the money in the offset.

However, recently, I saw a property with a very attractive return. It cost 850 K even. At the moment, my PPOR repayment is zero due to the offset. However, if I use the money from the offset account to outright purchase the investment property. Would the interest on the PPOR be tax deductible?

Normally, I usually take up a new loan for a new property. However, this one would be considered as commercial with higher interest rate if I did so.

Surely an interest charge on a PPOR is never deductible? To achieve deductibility on the IP wouldn't you establish a new loan secured by the IP, link a 100% offset to it and then ship whatever amount of cash you want across to the IP offset? In this case I would expect that the interest charges against the PPOR resulting from the reduction in its offset are non-deductible, however the interest charges on the IP would be? So it would be a case of balancing the cash across both loans.

I expect there is more to it, I may not understand what you are trying to achieve.

 

[Rolf Latham]

Surely an interest charge on a PPOR is never deductible? To achieve deductibility on the IP wouldn't you establish a new loan secured by the IP, link a 100% offset to it and then ship whatever amount of cash you want across to the IP offset? In this case I would expect that the interest charges against the PPOR resulting from the reduction in its offset are non-deductible, however the interest charges on the IP would be? So it would be a case of balancing the cash across both loans.

I expect there is more to it, I may not understand what you are trying to achieve.

in the ops case, he could fully repay the 850 k loan with the 850 cash and redraw the next dat

the redraw would be regarded as a new loan

Pls seek specific tax device

ta
rolf