Moving Money from One Offset Account to Another

Hi All

Perhaps a basic question but I wanted to check before I did anything.

Say you have an investment property with some equity into it. You draw down on that equity and create a loan for property costs on investment property number two with excess unused funds sitting in an offset. You have another loan on another property (say property three) with an offset account. Both loans are for investment related purposes.

Can I move some of the funds sitting in one offset account to another, if they are both for investment related purposes without any tax complications?

Just wanted to check the answer on this one.

Cheers

Leilah

 

I wouldn't recommend it.

See my tax tip 1

 

If Offset One contains borrowed money from equity in property one and drawn on loan from property one than if you move the offset balance to offset two and combine funds you really have tainted the nature of the borrowing. Good example is if you used Offset two to buy a boat. Then a portion of loan one is non deductible.

Doesnt matter if both are deductible purposes. You have blended two loan purposes and apportioning is difficult and tracing the deductible purpose may be questioned.

Best avoided.

Take care too that your payment of IP expenses using borrowed money isnt a scheme that produces a tax benefit. The ATO have focussed on loan interest paid using borrowed money as a concern. However in a artificial arrangement that inflates deductions for a IP v's payments on the taxpayers home Part IVA could still apply to other expenses.

Thats where personal tax advice that spans the whole arrangement may benefit

 

The poster may be wanting to borrow from loan A at a lower rate and move the money to the offset of loan B at a higher rate.

If so avoid using the offset but get advice on actually paying the loan down - refinance.
Like i outlined here
Strategy: Borrow Against the Main Residence for an Investment Loan (Shuffling Loans Around) Strategy: Borrow Against the Main Residence for an Investment Loan

 

Thanks everyone. Much appreciated.