Withdraw from offset of PPR and claim interest for IP

[cocka2]

Hi Guys,
I have an offset account established for my IO loan for my PPR.

I am thinking of withdrawing 50k from an offset account. I believe the extra interest that I would be charged for this transaction should be fully deductible?

I would like to know how such a transaction should be executed to make sure tax office is happy with me claiming the interest.

Option1) Withdraw directly from offset account (say by writing a cheque)

Option2) Split my total PPR loan amount of X into two loans, A and B, so that A is X-50K and B is 50K, then deposit 50K from offset to loan B and then withdraw the 50K and have loan B account empty.

Option3) ?

Thanks,

 

[Terry_w]

Withdrawing from an offset account has no direct tax consequences as there is no interest on an offset account and this is not borrowings.

However, withdrawing from the offset will result in more interest on the connected loan. So this has indirect consequences, especially if the loan in question is of the non deductible type.

Think about what happens - $100,000 loan with $50,000 in offset = interest paid on $50,000. Take out $50k and interest will be payable on $100k.
This is not good if the loan is not deductible.

Perhaps a better way of doing this in terms of tax is to pay $50k off your loan and then reborrow it, following all required steps. Whether you would want to do this will depend on a few other factors and you should seek legal and tax advice (not from a mortgage broker!!!)

 

[vmclee]

you cannot claim interest for a loan connected to your PPOR

 

[Peter_Tersteeg]

you cannot claim interest for a loan connected to your PPOR

Of course you can. Interest deductibility is determine by the purpose of the funds, not by the property it's secured by.

cocka2, you haven't specifically said this, but I assume you plan to use the money for investment purposes such as a deposit for an IP or to buy shares?

In scenario 1, you won't be able to claim the interest. You've hit it on the head in scenario 2.

 

[cocka2]

Thanks Guys,

 

[vmclee]

Of course you can. Interest deductibility is determine by the purpose of the funds, not by the property it's secured by.

cocka2, you haven't specifically said this, but I assume you plan to use the money for investment purposes such as a deposit for an IP or to buy shares?

In scenario 1, you won't be able to claim the interest. You've hit it on the head in scenario 2.

sorry, I stand corrected.

I read it that it was a PPR loan for the place he lived in, not as an investment loan using the PPR's equity as security.

 

[Coconutwheels]

Of course you can. Interest deductibility is determine by the purpose of the funds, not by the property it's secured by.

cocka2, you haven't specifically said this, but I assume you plan to use the money for investment purposes such as a deposit for an IP or to buy shares?

In scenario 1, you won't be able to claim the interest. You've hit it on the head in scenario 2.

With scenario 2, say down the track you have another stash of cash you want to pay off the ppor and redraw for investment. How would you go about it? Another split, or vary the current split somehow?
Cheers,
Ben

 

[Colin Rice]

With scenario 2, say down the track you have another stash of cash you want to pay off the ppor and redraw for investment. How would you go about it? Another split, or vary the current split somehow?
Cheers,
Ben

Pay down the PPOR loan with the 50k from offset and re-borrow the 50k in a separate loan split.

Another loan split would be fine as you can easily apportion the new loan to the new IP/investment.