Offset OO or IP

Discussion in 'Accounting & Tax' started by milobear, 22nd Mar, 2020.

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  1. milobear

    milobear Well-Known Member

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    I currently have 200k in offset on the OO loan since it is non deductible debt, however with the recent drop in fixed rate for OO at 2.29% would it be worthwhile to offset the IP loan instead? The IP loan's interest rate is 3.89%.

    Some quick calculations below:

    OO: $200000 @ 2.29% = $4580

    IP: $200000 @ 3.89% = $7780. After deduction of marginal tax rate of 37% + 2% Medicare levy. I end up paying $4745.8 of interest.

    If my calculations are correct, I will be slightly ahead if I offset the IP loan instead of OO? Am I working this out correctly?
     
  2. Trainee

    Trainee Well-Known Member

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    What else is in the ip offset, and where did it come from?

    where did the money in the ppor offset come from?

    any refinances?
     
  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    Why don't you just get 2.29% on the IP by debt shuffling $200k?

    That would save you about $3200 per year.
     
  4. milobear

    milobear Well-Known Member

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    No cash in IP offset at the moment. Currently parked in PPOR. The money is just salary savings.
     
  5. milobear

    milobear Well-Known Member

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    Thanks Terry, so how would I do this?

    Get a split loan on PPOR say $200k. Pay down to $199999 to avoid the account being closed, and redraw and put it into IP loan?
     
  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    Best to get some credit and tax advice...
     
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