Borrowing against equity

I have purchased two houses in Muswellbrook within the last twelve months, with 80% finance through a building society. I am considering refinancing with Westpac, who will finance up to 85% LVR without loan mortgage insurance. I paid $274,000 for the first property and $295,000 for the second. I believe they have increased in value by $15,000 to $20,000 each. My question is if I refinance to 85% LVR, will the interest on the loans still be tax deductable? I wish to access funds from the equity to initially place in an offset account against my PPOR, and maintain a flexable plan as to the ultimate use for the money. I will want to keep some of it as a buffer against future interest rate rises and any periods of vacancy in the two rental properties. I will contine adding capital to the offset account with the ultimate objective of building a deposit for my next purchase. So, by placing these funds in an offset account, will it affect my ability to claim tax deductions against my  interest payments on the 85% loans?