Tax question please: If you have an offset account linked to an investment loan, what is the interest that is deductible - the interest of the full loan or the interest of the reduced loan due to the offset if you have money in there. Eg. 500K loan and the offset has 100K. Do you claim interest deductibility on 500K or 400K?
Interest on the loan will be deductible. The loan balance will be $500,000 but interest will only be charged on $400,000. at 4% pa the interest will be $16,000 pa and this would be the deductible amount.
You can only get a deduction on the interest actually charged. In the example above you'd be charged interest on $400k. There is no interest charged on the $100k which is being offset, so there's nothing to deduct for that portion of the loan.
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