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Offset account and interest

Discussion in 'Accounting & Tax' started by Gaby Amoud, 22nd Mar, 2016.

  1. Gaby Amoud

    Gaby Amoud Member

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    Hello all,
    Long time follower, first time poster.

    I am sure the question has been covered, however do not seem to find the answer that i am looking for, so pardon me. The scenario is as follows:

    Loan type: variable I/O with offset(s)
    purpose: refinance of investment
    Loan amount: $350000 [$300000 to refinance, and $50000 in offset]

    If i were to take $20000 from the offset account for personal use:
    1- do I have to apportion the interest payable?
    2- can i put the $20000 back into the offset account and not affect my deductible interest?
    3- should i accept the offer for multiple offsets?

    Thank you all
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    1. yes
    2. no
    3. no. don't use an offset like this, but use a LOC with the offset against the main loan.
     
  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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  4. Gaby Amoud

    Gaby Amoud Member

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    2. Will that result in a mixed purpose loan then?
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    sure will. Any deposit into the offset account will result in a mixed loan. Even with no deposits you still run the risk of causing a mixed loan.
     
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  6. Gaby Amoud

    Gaby Amoud Member

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    so my interim solution could be to have a 2nd offset account where i can put my own savings (plus salary) and not touch the borrowed money except for investment (and be very careful not to mix the accounts?) Thank you
     
  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Best to avoid if you can, or do this and then pay back into the loan and redraw before use.

    Don't forget to split the loan.
     
  8. Gaby Amoud

    Gaby Amoud Member

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    Much appreciated Terry,

    Regards
     
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