Hi Singer,

You're asking exactly the question I should have years ago when I bought my first PPOR! I fell into the "trap" of not planning ahead, and putting measures in place for when I moved out & it became an IP.

For the years I lived there, I happily paid P+I+extra repayments into the loan account (no offset). When I came to move out, I suddenly realised I'd done myself a disservice by paying into the loan account, as opposed to an offset … because I couldn't redraw all those extra payments & then claim the resulting interest against my income. If I had used an offset, I believe I could have done that & the ATO would have been happy, because the loan figure wouldn't have been affected when I "cleaned out" the offset account…which could have been used for better purposes, such as deposit on my 2nd property.

Good luck! You're doing the right thing by looking to structure things properly NOW, rather than later.