How to structure my loan

This redraw are you planning on using it as a deposit for p2 loan ?
You may be better setting up a line of credit loan against p1's security you can borrow usually up to 80% LVR this works out to $160,000 if you can service both loans (lender will check if you can service it)
And this separates p1 private PPOR loan with LOC investment use loan making it easier to work out tax time.
Ask your lender if you can do an LOC

If you rent out p1 you can only claim interest on the 240k loan
I am assuming you are trying to reduce capital gains tax by moving every 5 to 6 years however only one property at a time can be deemed your PPOR. So when you move out of p1 and start renting it out you have unless you deem it to remain your PPOR you have changed its use and this is a capital gains event. The value of the house p1 at this stage becomes the cost base for the capital gains tax if you sell it in the future.
If you deem it to remain PPOR then p2 is subject to capital gains tax if you sell it.

As you owe more on the loan for p2 it would most likely be negatively geared and you could reduce other tax assessable income more than p1.
Depends on your marginal tax rate as to how much you get back at tax return time.

Some people may be correct in what they told you.
What happens is the net income or net loss determines if the expenses are claimable. Yes they are claimable but if the rent income is greater than the expenses you will pay tax on the extra net income.
net income = rental income – total expenses incurred
net income = rent – (water rates, insurance, council rates, repair costs, interest, management fees, depreciation)
if this sums up to a negative number then you are making a net loss which can come off other income you have paid tax on already)
if this is a positive number then you are making income that is taxable.
 

LOC loan 120k against p1 to cover 96k for 20% deposit (avoids needing LMI)  and 24k cover possible stamp duty costs
Go to another lender and borrow the $384 k required or remaining short fall.
Then pay off LOC as soon as possible
 

[/quote]

1. I do not think there are any tax benefits in renting P2 out first, other than the normal negative gearing issues. There could be some disadvantages though. Once you live in a property you could class it as your main residence and be later entitled to a CGT exemption. It cannot be your main residence until you live in it (bear in mind you can only have one main residence).

2. No, not true. ATO looks at the purpose the funds were borrowed for. In your case you have borrowed to buy the property. if that property is a rental then the interest on the loan would be deductible. However, if you have redrawn money from the loan this may complicate things and the interest on this redraw may not be deductible.

3. You will be possibly moving out of both properties and renting, so i would suggest you do not pay any loans down. Use IO loans on both and have a 100% offset attached. put all cash in the offset against the property you are living in, and if you change, move your cash to the new property you will live in.

For the new property i would set up a LOC on P1 and then use this as 20% deposit on the new one and then take out a separate loan. Keep both loans secured by just one property. ie no cross collateralising.