How does one justify to ATO

Hi all

If you have a PPOR Loan with Offset a/c…eg. $200000 loan.. plus
offset account (wages go into offset account).

Then you have say a IP loan……..$220000 loan..Interest only.

Say you have set up a LOC from the equity in you PPOR and this is dedicated to Investment purposes. The interest on the LOC is TAX DEDUCTIBLE.

The question is, does it matter where the rent goes from the IP rental.

have heard different views on this.

Some have said it should go into the IP LOC investment account. As it it is income from the investment

Others, its ok for it to go into the Personal offset account to PPOR.(Pay down PPOR quicker) IP Income can go wherever you want it too.

Lets assume its the latter how do you explain to the ATO if questioned that you are not trying to increase your tax deduction by the rent going into the PPOR offset account and the balance on the Investment LOC is growing and so the interest bill is greater.
I am not suggesting captilizing interest on interest.

I’m saying the investment LOC pays the IP loan interest and IP expenses and each month the interest is paid on that IP LOC.
From Offset account.

Accountant suggests that its safer to do it the first way, if audited ATO are more likely to not hassle one so much.

Cheers
SG

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