Removing $ from redraw and parking it in Offset

[ol mate]

Hi People.

Im in the process of changing my IP loan to an offset instead of redraw facility. Before I change it over is it benificial for me to extract the redraw (approx 10k) and park it in the offset?

What tax implications will this have? The money will evetually be used as a deposit for my next IP.

Cheers.

 

[Terry_w]

Hi People.

Im in the process of changing my IP loan to an offset instead of redraw facility. Before I change it over is it benificial for me to extract the redraw (approx 10k) and park it in the offset?

What tax implications will this have? The money will evetually be used as a deposit for my next IP.

Cheers.

Redrawing means reborrowing money. ie a new loan. Interest will only be deductible if:
- funds borrowed are used for investment
- the investment is direct
- no mixing with non borrowed money.

 

[Colin Rice]

If redrawn funds have been mixed, that is used for personal use, then a clear delineation needs to be drawn between personal and investment use.

 

[Dean2012ad]

Ol Mate, the redraw/reborrowing can only be tax deductible if used for investment purposes.

When I bought my first I had a P&I IP loan with redraw facility. I soon learned about the disavantages of paying down deductible debt and redraw facilities for IPs.
To in a way fix the problem,
I used my redraw (60k) for a deposit on a my second IP, with the remainder (8k) redrawn over 3 years to pay for rates and insurance for both IPs.

One suggestion is to leave the 10k in the redraw facility and redraw to pay for rates, insurance, repairs, part deposit on new IP etc.
I parked in an empty savings account for 3 or 4 minutes then paid IP expenses. This which was approved by private ruling.

You would want to consume/recycle that 10k in redraw first before using your own money for IP expenses.

DO NOT park Offset account. This will dilute the re/borrowings if mixed with personal funds, and is not considered to be a borrowing for an investment purpose.

 

[Brady]

Ol Mate, the redraw/reborrowing can only be tax deductible if used for investment purposes.

When I bought my first I had a P&I IP loan with redraw facility. I soon learned about the disavantages of paying down deductible debt and redraw facilities for IPs.
To in a way fix the problem,
I used my redraw (60k) for a deposit on a my second IP, with the remainder (8k) redrawn over 3 years to pay for rates and insurance for both IPs.

One suggestion is to leave the 10k in the redraw facility and redraw to pay for rates, insurance, repairs, part deposit on new IP etc.
I parked in an empty savings account for 3 or 4 minutes then paid IP expenses. This which was approved by private ruling.

You would want to consume/recycle that 10k in redraw first before using your own money for IP expenses.

DO NOT park Offset account. This will dilute the re/borrowings if mixed with personal funds, and is not considered to be a borrowing for an investment purpose.

This is exactly what I would suggest.

The money is in there now, only reason it should come out is for IP use. Expenses, rates, renovations or another IP purchase (seperate loan)

 

[jerky]

Hi there
not sure how to quote but as Dean had put it "I parked in an empty savings account for 3 or 4 minutes then paid IP expenses. This which was approved by private ruling. "

I need to do just this, as I have a $600 bill for an IP and redraw funds available in that IP's mortgage, but the min amount allowed for redraw is 2k. Is it ok to redraw the 2k out of the mortgage, into my savings account, pay the bill, and then transfer the remaining $1400 back into the IP mortgage? Is that considered ok or do I also need a private ruling to do this?

I would like to avoid just paying the money out of my PPOR savings/offset account, as that is my non deductible monies...

thanks guys