Debt recycling - help!

I had my PPOR loan (let's say $1m) with ANZ then switched to AMP. At the time I had 2 loan splits - $750k non-deductible and $250k that I paid down fully, then used the funds for investment purposes (so deductible).

I then refinanced to AMP and set up 2 different loan splits (again $750k non-ded and $250k ded). I currently have the offset accounts full - so $750k sitting in Offset Account #1 against the main loan split and $250k in Offset Account #2 against the $250k loan split.

Given the $250k is sitting in an offset against the loan, not in the redraw facility, can I spend the $250k sitting in the Offset Account #2 on non-deductible items without compromising that the $250k loan it's offsetting against is deductible?

Reason for asking is I need to pay a $60k deductible expense so wondering if I need to set up a new loan split at $60k, pay it down fully, then spend the money, or if I should just pay out of the Offset Account #2. AMP is painfully slow at setting up splits with a Master facility, and their customer service is unbearable!!

Hope this makes sense..

 

Make a new borrowing for the 60k. The purpose of that loan is then deductible.

Then put money into an offset account for it.

that is pretty rough - you need to work through step by step to achieve it of course. Devil in detail.

 

It sounds like you have an investment loan fully offset. If you remove money from this offset the interest would increase on the loan, but it should be deductible

Tax Tip 82: Taking money from an offset account on an IP and Claiming Interest
Tax Tip 82: Taking money from an offset account on an IP and Claiming Interest


But that will mean you have $60k less cash to enjoy in retirement, so it might be better to just borrow $60k more if you can.

or Debt recycle the other loan.

 

Thanks Ross and Terry. Yes, the smaller loan is deductible, I was just worried that I may have ruined that by putting money back into it... but the money is in an offset not the redraw so I think I'm OK.

I've put in a request for AMp to split my main loan into a $60k loan and $690k loan but they are saying 5-10 business days and I really need to send the money sooner than that! WIll keep chasing them.

Thanks

 

If you put money into a loan you are paying it off. Did you do this after using the money?

 

I paid down the loan, then spent on deductible items. Then I put money into the offset against the loan (not the loan/redraw account)

 

that doesn't sound good. You should get some tax advice...

 

That sounds fine to me as long as the funds used for deductible purposes came directly from the loan account and not via any of your offsets.

 

Yes that the right approach. Just make sure you pay the 60k loan down to zero with cash, wait a day so you get a clear $0 balance on your statement and them pay your deductable expenses directly from the loan account.

With regard to the timeframes for restructure requests, it is what it is. All I can suggest is you need to have finances organised in a way that anticipates your future requirements!

 

PS I don't think you'll have much success expediting the request with amp but it can't hurt trying

 

Yeah it's apparently sitting with their credit department for assessment. I have no idea why it needs to be 'assessed' as I am not changing my master limit, I'm simply splitting a loan! But that's AMP for you I guess...

 

Yeah that is odd. Great product, patchy customer service! I say patchy as occasionally they surprise me.

 

Haha yeah, even the customer service guy on the phone was very confused as to why they had to 'approve it'. Anyway, it's now approved and it is now in line to be processed. I wonder how many days/weeks that will take