Offset Accounts tax deductibility

Hi guys

I'm currently considering putting extra funds to offset our IP, the loan is 425k. There is already an offset account attached to this loan with 70k of funds in there. These are both with CBA.

Also, this IP is a joint account between me and my mother. Me and my mother also have some extra savings cash in our own separate accounts. I have my own funds in ANZ, and she has majority of her funds in her ING Direct. We were wanting to offset more interest deductions by putting our own savings cash into an offset account at CBA. I'm guessing this is allowed and will still be tax deductible?

Just assume I put another 25k, and my mother puts in another 25k of our own savings cash from ANZ and ING into a second offset account at CBA (assuming this is possible)..now the main question I have is, what if we then withdraw some of this cash back to our own savings for our own expenses such as shopping, personal spending? Can I still claim tax deduction on our IP at least on the second offset since it is tracked?

Cheers
Ed

 

You are worrying about nothing. All that happens is that when you put cash into the offset the interest paid on the loan decreases, if you withdraw the cash the interest paid will increase. Any tax changes are as a result of changes in the interest paid on the net loan(loan balance - offset balance) and dealt with in the split of net property income at the end of each financial year for your tax return.

 

Tax Tip 82: Taking money from an offset account on an IP and Claiming Interest Tax Tip 82: Taking money from an offset account on an IP and Claiming Interest

 

Offsets dont create tax deductions.

Money in a offset reduces interest on that loan. If its a non-deductible loan then you save the after tax value of the reduced interest. If its a deductible loan the deductible interest will REDUCE. I always advise that you offet a non-deductible loan before you offset a deductible loan for this reason