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Are funds from offset to pay investment deposit tax deductible?

Discussion in 'Accounting & Tax' started by kennyboi, 10th Apr, 2016.

  1. kennyboi

    kennyboi Well-Known Member

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    Are funds drawn from an offset account to pay for an investment property 10% deposit tax deductible?

    I know it is likely not, but my friend don't believe it and I cannot find specific reference or ruling from ATO to convince them. Can anyone please guide me?

    Thanks
     
  2. D.T.

    D.T. Adelaide Property Manager Business Member

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    Funds from offset account are your own savings. How can your own money be tax deductible?
     
  3. kennyboi

    kennyboi Well-Known Member

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    I agree, but my friend said the money was drawn from the loan and it goes towards the investment purchase.
     
  4. D.T.

    D.T. Adelaide Property Manager Business Member

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    Drawn from the loan and drawn from the offset are 2 very different things.

    Interest incurred on drawing money from loan can be deductible if used for investment purchase. It's not a clean situation to be in though, especially if the main part of the loan is for his PPOR. It'll give his accountant a migraine.
     
  5. Hodor

    Hodor Well-Known Member

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    And remember an offset and redraw account are two very different things. People too often say they are the same.
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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  7. kennyboi

    kennyboi Well-Known Member

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  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    What does she think is ok?

    Yes she can take savings from an offset account to use as deposit. There is no direct interest incurred as offset accounts don't pay interest. They reduce the interest payable on the associated loan that they are connected to.

    Indirectly the interest on the loan that the offset is attached to will increase. If this loan interest is deductible because it was used to purchase an investment property then in that case the interest on the deposit would indirectly be deductible.

    If the offset was linked to a non-deductible home loan then the extra interest incurred on this loan would not be deductible.
     
    kierank likes this.
  9. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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