redraw, offset and tax

[b simpson]

couple of questions re tax.

Scenario 1.

If i had a $100k IO loan for an IP and put in an extra $20k, then removed the $20k so the balance returned to the original $100k would that effect the tax deduction of the loan? Can i just claim the interest of the loan for the financial year assuming the loan doesn't go above the original value?

Would it be different if the $20k was removed to purchase another IP as opposed for personal reasons?

Most people seem to have an offset loan to park additional cash, is that the best way? Perhaps I need one of them.

Scenario 2.

If I bought a property in january to be an IP, but spent 2 months doing a reno, would the tax on the loan only become a deduction after the reno was completed and then rented or from the purchase date in January?

Sorry for the beginner questions...I need a new accountant, my current one seems like a novice as well as other professional people in my life..., but in the meantime I would be interested in answers to the above questions.

 

[Terry_w]

1. Redrawn amount is treated as a new loan and the interest only will be deductible if the funds are directly used for investment or business purpose

2. Depending on the circumstances, sounds like a capital expense and not deductible.

 

[Peter_Tersteeg]

As a general rule money you've saved is best stored in an offset account rather than redraw.

If you move the money into the investment loan, you can only maintain tax full destructibility if you redraw for a tax deductible purpose, if you redraw for personal use (PPOR, car, etc) you'll compromise the tax destructibility of the investment loan.

If you leave your savings in an offset account, you've got more options, you can still move it to the redraw facility later if your strategy/needs require it.