We have about $100K we want to invest, and would like to implement debt recycling. How could it work if the mortgage on our PPOR is $1.32M in 4 splits: $1M @ 3 year fix $100K @ 2 year fix $100K @ 1 year fix $120K variable The variable has 3 accounts offset against it (one joint, two individual). From what I've read, I think we need to: 1. Pay the 100K into the variable then redraw it. 2. Since the redraw cannot be into one of our existing accounts, we need to set up a new account for the redrawn money, into which we put nothing but that redrawn money. This account would be the fourth account that's offset against the variable. 3. Transfer the money from the new account directly to our broking account, and then invest. 4. Once the 1 year fix expires and that loan becomes variable, if we're lucky enough to have another spare $100K then, repeat the process above. Is that right? Does it matter that initially we're only paying/redrawing $100K of the $120K variable split? Will having 4 accounts offsetting the loan create problems? If yes, can we solve that by making the new account the only one that's an offset? And finally, do we have to have dividends or capital gains paid back into the mortgage or the new account or can we just reinvest them?
Yep. What happens to the interest you're paying for the other $20k?? As @Terry_w would say, "Seek specific advice"
Just make a split of the same size that you want to invest with. Pay if off and redraw to invest without any detours or mixing. Best to get specific advice tho as I see lots who have buggered it up
Re Step 2, can't you transfer $100k directly from your Loan to your broker account? Just wondering why you'd need to setup a new account for $ transfer purpose.
Perhaps OP needs to read the very first Terry's Tax Tip: Tax Tip 1: Parking borrowed money in an offset account
Apparently not, according to our bank. They say we can only withdraw into one of their/our bank accounts.
Nice going there @Terry_w btw how about this: 1) missus pays her salary into my offset account, 2) I split the loan based on the portion received 3) pay down the loan using the missus's money and 4) then redraw it back into the missus's investment account. Is that still tax deductible though?
