Making a p&i loan like an io loan by redrawing consistently

Its worse than this. If you ever redraw the extra imterwst would not be deductible against this property. So if you are paying PI and the balance is going down you cannot simplly take it up to 70% again. The deductible portion will be the new balance of the loan before any withdrawals

 

I think I get it now.
So if you were to buy a 400k investment (using the 100k borrowed from the loan account and 300k additional loan from elsewhere) then 100% would be deductable versus if you didn't first put it in and out of the loan account you would be paying 100k cash and borrowing 300k so only 300k would be deductable.

Seems strange the ATO don't have a problem with this. Is there a minimum time period for paying down the loan then pulling it out again to instantly make it deductable?

 

Yes, that's right. Also remember that the 100k should be taken out as a loan split so as to create a clear distinction that it is a separate loan and for investment use.
It doesn't instantly become deductible. The interest on the split becomes deductible when it is used for investment purposes. I am not aware of a time limit imposed.

 

Whitecat, yeah, be careful, when I dug into this it is not an offset at all, it is a re draw, they should be pinged for this as they clearly advertise offset.

Just put the money into another IP with real offset, or refinance.

If this one with Liberty now is/will be an IP, get a proper offset for your PPOR, revert this one to IO, put cash in the other real offset.

 

I'm not a broker or accountant so I'm going to put this in stupidly simple terms that I understand....

Deductibility is assessed against the "purpose of" the loan not the security of it. If the loan is drawn down & used for investment then it is deductible. If it is drawn down & parked somewhere waiting to invest then its not. That's why LOE exists.

Your frankenloan surely is a breach of some consumer law because it is not I/O with Offset.... which is exactly the product I'd be looking to change to but a legitimate one.

The thread topic is really going to do some people's head in because it is nonsensical.... just read it out loud & listen to the words that come out...... it's fundamentally jacked up.