Structuring finances to maintain tax deductability

[Shahin_Afarin]

The money in the offset account will just be for whatever deposit I need, say 60k on a 20% deposit on 300 k house.

I'd still need another loan to cover the balance of the purchase.

The bottom line seemed to be I can only use it for purchasing property and associated buying costs and nothing else.

Which is fine. I'll probably be able to buy 2 more houses this way before I tap it out.

Be careful - if its an IP then you want to "borrow" instead of use cash in order to maximise your tax deductibility. Unless you are planning to convert the current PPOR and upgrade to another PPOR.

I would clarify this point with your accountant.

 

[DizzyStuff]

I will clarify that.

I was concerned about whether or not the money in the offset account is still classified as "borrowings" myself and had asked if I should just pay down the loan by the full 158k and redraw later when forming a new deposit.

I think perhaps I didn't make my point clear enough at the time.

 

[Qlds007]

Apart from the loan structure which seems a little tainted to me i would ask why ME Bank.

They have a few niche's but certainly equity loans and standalone variable rates are not one of them.

 

[Brady]

I think you should ask your accountant to clarify. A better use of the offset money is to use it to pay off a bit of the PPOR loan, then redraw it out straight away to pay for the 20% deposit on a new IP.

Bang on Aaron!

Also referred to as debt recycling. Once the funds are redrawn then its considered to be re-borrow and s the purpose is for investment it's deductible.
Whereas using offset is just using savings...

 

[D.T.]

Whereas using offset is just using savings...

Which in turn increases your ppor mortgage repayment each month

 

[Brady]

Which in turn increases your ppor mortgage repayment each month

Yup, it's not what you want.