Terryw wrote:
Thats good,but considered the tax ruling mentioned by Ashley?

I have, the only time it will get interesting is when I take all the money out of my interest offset and buy my PPR. Then I will be shown to be engineering tax benefits by letting the investment loan redraw on itself and hence the interest charged following the redraw…[Read more]

Yes correct, so interest charged only on the 9% of the total savings will be tax deductible since only that 9% of that total savings can be traced as being redrawn for the interest payment.

I’ve spoken to my bank and they’ve agreed to let the loan redraw on itself to pay itself off. There will be no interaction with my offset account what so ever…[Read more]

Terryw wrote:
I would imagine it would be like this:You have $10,000 in savings in the offset. You borrow $1000 and place in into the savings. total $11,000.Of this $11,000 only $1,000 is borrowings = 9%So when you take $1,000 out to pay the interest only 9% of this is borrowed funds. So only 9% of the interest on the $1,000 borrowed would be…[Read more]

Terryw, how would they calculate the tax deduction available on borrowed funds vs savings?

If you have pulled the interest payment from the loan the night before and placed it back on the loan the day after, the interest charged on the loan will not be any different to what would have been charged if you paid the interest payment without redrawing.

hahaha nice analogy…

At the end of the day, interest will be calculated annually and deducted at tax time. The total interest charged on my loan will be some interest $x. The rental income will be $y.

The tax deduction will be based on $x – $y – expenses. I can show by way of transaction history on both my offset and home loan accounts where…[Read more]

Rob G. wrote:
Money borrowed to pay interest on your investment loan would usually be an allowable deduction.The problem is the temporary redraw and parking with private funds (in the offset account) causes loss of traceability.e.g. $10k private funds in offset account.$10k interest payment is due. Redraw the day before and park in offset…[Read more]

I see your points, thank you for the advice. But it’s quite obvious from the transaction history that I re-credit the loan for the entire original redrawn amount.

If I were to pay the interest every month out of my own pocket, the interest charged on my loan would be the same. For example:

Outstanding loan balance: $200k, interest charged…[Read more]

The $10k is savings, but its offsetting the loan interest…

P.S. is there any way to increase the principal owing on my investment property and still claim full tax deduction on the interest charged on the new loan amount, without redrawing it all and having to utilise that money for investment purposes? (ie. renovation)

It enables me to keep maximum funds in my offset account readily available at any time. There is no mix between borrowing and savings as anything that comes off my loan goes straight back on.

I am increasing the principal on the loan though by doing this… If I eventually buy my PPR and use funds in my offset account to purchase that, is the…[Read more]

Sorry for the confusion, here is how I manage my loan:

Current balance $185k, Total loan amount: $250k

The loan is an interest only loan, I have an interest offset account linked. Currently I have $10000 in my offset account, which I use for day to day purchases.

Once a month interest is charged on my loan, last month it was ~$1100. I redraw…[Read more]

1. I only place money into my offset account from the loan, which then I pay back to the loan as part of the mandatory interest payment. No money sits in my account from the loan (only momentarily until the interest payment is taken). I do have personal funds in this account. I never redraw the loan for personal use.

2. I do not default on the…[Read more]

well I just installed an air conditioner the other day and had to cart all my tools in my sedan… I'm also planning to do some gutter work soon which will require more carting of tools/parts to and from home to the investment property… what sort of proof do you need?

So if my expenses were say $5000 (deductable) and my rent income is $3000 and my income is $80000, the amount of money i will pay tax on this year is $80000 + $3000 – $5000 – (work related expenses) ?

Keeping it simple is all well and good, but transferring these properties later if I decide to set up a trust will cost alot more than the additional costs that may be incurred now.

The way I see it, if I have collateral (30% cash deposit) for a line of credit from the bank (not a home loan), then the bank does not care how I use this money to…[Read more]

Thanks for that, very useful information indeed.

The last question I have is, I have about 30% of the market value for the house price I am looking at in cash. Will the banks want to use the house I purchase as security for the loan (in addition to the 30%)?

The reason I ask is, if I take out a loan to buy units in a trust, the house will be…[Read more]