Offset account and Investment loan

I have a tax question related to investment loan. I got really confused and yes, I will be talking to tax accountant, but just wanted to get some insight here first. I have a new loan for $267,000 for an investment property (P&I) with an offset account (the interest rate is 3,19%). I have about 80,000 in my bank that I was planning to put into offset. I am planning to buy another investment property and/or shares with this 80,000 in a few month time (at this point I am unsure when).
But now I am thinking if these 3,19% are tax deductible, is there a point to have an offset and keep there $80,000 for a few month? I am reducing the percentage, but I am also reducing what I could get back from ATO. Any thoughts? P.S. if it helps, I am in $45,001 – $120,000 tax bracket

 

Have you got any non-deductible debt, or are you rentvesting?

 

If you didn't put the $80k in the offset where would you put it? If you would be earning more than 3.19% pa you might be ahead, but if not...

 

No, I don't have non tax deductible debt; I have another investment loan and yes, I'm rentvesting

 

At the moment no where. I understand if money just sit in my bank I will earn zero, but my question is by putting money into offset am I maximizing my gains or minimizing through missing out on tax returns?

 

Ok then in that case yes it should be in your offset. If you buy a second IP, it should go into the offset for the loan that is charging you the highest rate of interest, it's as simple as that.


As for this comment:

No that's the wrong way to think about it. Reducing the amount of tax you pay is important, but what you're saying is you'll be going out of your way to INCREASE the money you lose for tax reasons. That is not a wise idea at all.

No no no. You're making this too complicated. See my first comment, one and done.

 

Ok, thank you, I just wanted to make sure I am on the right track. When people are talking about primary residence and an investment loan, everything is straight forward, but not so much so when you have an investment loan and another investment loan

 

If you're on the maximum tax rate, then the most the tax deductions would be is currently 45 cents for every dollar spent. After the tax deductions you're still paying 55 cents.

Not putting money in the offset account simply so you can save some tax doesn't make financial sense.

 

Thank you. I thought so myself, just needed reality check

 

Think about it. Draw up some examples for yourself

 

Have you actually thought about this?

 

This.

No offence to the original poster but I am amazed by the amount of people that don't understand the concept of claiming a tax deduction against money spent. It doesn't mean you get the money back. It means you get back the tax you would have paid on that money. In essence you still have less money at the end of the day. So unless spending that money comes with a net positive result overall then don't spend that money.

In this case spending money refers to paying interest on money you have sitting there collecting dust. Put it in the offset and do it today. Every day that $80k is not in offset it costs you $7 in interest. Yes I worked it out for you.

 

Did you consider going I/O with an Offset?

... and mimic a P&I loan by depositing the principal component into the Offset each month.

With this approach, your cashflow isn’t impacted (assuming the I/O interest rate is close to the P&I rate) but the Offset balance would grow each month.

 

The only consequence I can see, is off-setting a P&I loan means the Principle is reduced quicker, which means you total loan amount will come down for future tax deduction purposes against rental income.

Having the money in offset saves you ~2400 a year, which is much better than a fixed term deposit of 12 months for less than 1%