You have to transfer the funds from your Offset Account. They cannot just take it. An Offset Account is a name given to a transaction account when it is linked to a loan and offsets the interest on that loan when funds are parked in it.

TMA

You need to have the facilities to save a file as PDF on your own computer. If you can no longer do it, something on your computer has changed. You can always save it as an email or word document or just leave it in your email folders as is.

TMA

Yes. It relates to percentage return. The underlying currency is of no consequence.

TMA

A PERFECT reason to have a loan with Offset structure!!!

Moving into your investment property will see your non-deductible debt jump from 150k to 450k!!! OUCH!!!!!

Personally, if I was certain about moving in for a long time, I would sell the house to a company I own and then rent it back at market ‘rent’ and then all loans would be deductible.

The initial stamp duty costs etc would be a small price to pay if you really want to move into that home.

TMA

Forget the LOC. They are an expensive waste of time unless you want to be ‘fashionable’. You would be better served with a loan with offset regardless of your personal situation!

TMA

You are not like me!!!

I clearly stated “Just sign the right loan document”.

What this means is that money can be borrowed from anywhere as long as it can be proven to be a loan and the funds were used for investment.

Your example outlines a completely different issue which involves 50% ownership of the property. You will never be able to deduct more than what you own.

The ATO can not refuse the deduction if the husband borrows money and then onlends onto his wife. Onlending money is an investment even if you charge the same rate you are paying. They just require a loan agreement be in place. The wife will then be able to deduct her 50% if the property is an IP.

TMA

Sort of…

The Offset Account is linked to the loan account. If you had the 10K sitting somewhere else, you might be earning 5.40% on this money. You would also have to pay tax on the income.

If you put the same 10k in the offset attached to your PPOR and your loan was 6.75%, it would be the equivalent of earning 6.75% tax free on this money. If you were in the highest tax bracket, ths is around 13% return before tax.

The second that 10k hits your account, the principal amount is reduced, not the interest. For example, if your loan is 100k, with the 10k in the offset account, it would be calculated as though the loan is 90k (but in reality it is still 100k assuming you are only making interest only payments to the actual loan). Interest on 90k is a lot less than interest on 100k.

You can also take the 10k out at any time and the interest will just be calculated on the 100k again.

This only occurs if you make the same P&I payment every month. I still suggest only making interest only payments as it has the same effect if the money is sitting in your offset account or in the loan. The difference is, once in the loan, you lose some tax benefits later if you change a PPOR into an IP.

As far as I am concerned, there are no cons to using a properly structured loan with offset account. Regarding using a LOC, I will just give you two cons…. HIGHER COST & LESS FLEXIBILITY!

TMA

Wife can lend to husband. Just sign the right loan document.

TMA

If your properties are positive cashflow and your equity growth is non-existent, your deposits come from the positive cashflow.

TMA

Best loan structures….

Investment Property – Interest Only Loan with Offset
PPOR Property – Interest Only Loan with Offset

There is no other choice in my mind for those buying property and wanting flexibility!

TMA