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Offset Account for I/O IP

Discussion in 'Accounting & Tax' started by cheekykoon, 19th Oct, 2015.

  1. cheekykoon

    cheekykoon Well-Known Member

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    Hi, wondering if its best use of money?

    a. to put money in offset account to offset against interest on IP or to put money in normal savings account for cash flow.
    b. let the interest in IP run and put the money elsewhere to gain some interest?

    whats the best use?
     
  2. montoya

    montoya Well-Known Member

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    If all you have no POOR, personal loan, credit card, or even HECS debt (ie non deductible debt), why not stick it on your IP offset?

    The interest paid on your 'high' interest savings account will probably not be as much as the savings of interest on your IP repayments. And, funds being in offset instead of redraw means that no matter what/when you pull the money out and for what reasons, you won't be contaminating your loan.
     
  3. cheekykoon

    cheekykoon Well-Known Member

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    Hi Montoya,
    Thanks for your reply...
    that is good to know that the loan will not be contaminated.
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    If just you then it is a straight forward answer = whichever has the highest interest rate. Tax effect would be the same if the rate on the savings account is the same as the loan interest rate, but loans are always higher.

    However, if there is a spouse then there would be different tax rates between you and her/him so you would need to do some calculations if you would consider parking money in their accounts.
     
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  5. cheekykoon

    cheekykoon Well-Known Member

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    Thanks Terry!
     
  6. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Hi OP

    Do you have a PPOR mortgage?

    Cheers

    Jamie
     
  7. cheekykoon

    cheekykoon Well-Known Member

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    Hi Jamie,
    No PPOR.