Fair call. 
I've already taken steps to contact these professionals. Have found a tax accountant who can advise on how I can safely restore tax deductibility with the IP loan's surplus being put in the IP loan's offset account.

Thank you very much for your help, Terry – will look for a solicitor who understands these matters well.

Found this advice from BANTACS that I believe should answer my question above:

"The basic rule is that the interest on a loan is only tax deductible when the money was used to buy an income producing asset or to refinance a loan that was used to buy an income producing asset."

Looks like the answer is YES – I can sell my PPOR to my wife for zero…[Read more]

Thanks again for clarifying this. 
I found some corroborating comments from tax accountants BANTACS:

"Interest on a loan is tax deductible when the money borrowed is used for income producing purposes.  Case
J54 (1958) 9 TBRD established the principle that interest is apportioned according to the ownership of the
investment purchased.  …[Read more]

Zanshibui wrote:
But if I follow the money I don't see the profits that you are trying to save tax on…
The house is currently your PPOR – no income
when you rent it with your 80% loan still owing – not likely much income on this one
if you continue to refinance to fund deposits on IP2 and IP3 as you have stated  even less likely much income on…[Read more]

Ok we definitely dont want to go down the mixed loan path… I take it what I need to do then is clearly split that IP loan into one 170k investment portion, and another 100k private portion… then fully pay back the 100k private portion.  When I'm ready I can then take out that 100k as a new investment loan towards the deposit for another IP.

I…[Read more]

Happily (in a sea of despair), OSR does allow this.  It is not allowed for the FHOG, but is for the first home owner zero stamp duty concession.

Top call centre question #1 listed on OSR website:
Q: "A husband and wife purchase a home to live in as their principal place of residence. The property is valued at $490,000. The husband has not owned…[Read more]

I know of the existing exemption when adding a spouse to title of main residence as you rightly point out, but this is a separate concession that applies here.

The QLD govt brought in a zero stamp duty concession for first home owners' purchase of a main residence effective from 21 Sept…[Read more]

This is the equity loan I've taken out over the PPOR currently in my name. The loan was at 80% LVR of the PPOR value and was fully directed to purchase the IP (which I'm having the offset dramas with).
If I transferred the property to my wife's name or go tenants-in-common with her, then that would mean the loan would have to be refinanced. If her…[Read more]

Tom,
My understanding is that if my wife who is not working and does not derive an income is on the mortgage, I can only claim 50% of the loan interest as deductible.

Happy to be corrected if wrong.

Terryw wrote:

This is also a mistake – parking money into an offset account.. You have borrowed money and placed into a savings account. This is not a commercial transaction and therefore the interest is no longer deductible. Later when you go and use the funds for investing the interest won't be claimable because the funds that you will be…[Read more]

Thanks Terry.
The key benefit that we would derive from the PPOR being fully owned by my wife is that when it becomes an IP she will be able to collect about 15k of rent which being under the 20.5k pa effective tax free threshold will mean she pays no tax on the income. So her taking out a loan to buy it off me at the full market value wont really…[Read more]