PPOR to IP: Intrst 100% tax deduc/offset by principal payments in previous loan

Hi All,
I think similar questions have been answered several times in this forum before but I feel my situation is a little different which makes me confused if I have understood the concept correctly. So posting another PPOR to investment question :-)

I bought my unit (400K) in Jun 2012 to live in and turn it to a investment property later when we plan to move to a house in a few years.
Didnt research much and took Loan from one of the major banks with not the best rate.
The loan was P&I with 100% offset account.
Refinanced my loan to a non bank lender within 3 months (Aug 2012) to secure a good rate. But this loan did not have a separate offset (which I didnt realize until the settlement was almost complete. Felt misled by promotion and I also blame my ignorance).
Both me and wife salary was going into the account we did not have separate bank accounts. By Jun 2013, we had saved about 70k into the loan
Only then I learnt that is not a good idea to pay off loan if there is intention to change PPOR to investment. So I refinanced again with good rates and made sure it is 100% offset with a interest only option.

Now we are going to move somewhere else and make the unit into investment. Will the interest tax deductible on the full loan amount or should I offset my loan by 70K that was paid off in previous loan before calculating interest for tax deduction.
I think the answer is I will have to offset by 70K before calculating the interest but I am hoping someone will say that I am wrong.

• This topic was modified 10 years, 6 months ago by  appg2.