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Question about offset account and tax deductible

Discussion in 'Accounting & Tax' started by Jat, 21st Jun, 2016.

  1. Jat

    Jat Member

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    Hi all,

    I have a question about Offset accounts. I have an Investment property loan and I got some equity from that property on an offset account linked to that loan.

    To use some figures for the example: let's say I have a $300k loan on the investment property and $100K on equity from that property on the offset account (I'm paying interests on $200K).

    I need $5K to pay repairs on that same property, so I want to use the offset account money to pay for it.

    As far as I know all that is tax deductible. The question is, I will have $95K in my offset account (after I took the 5K for repairs), let's say in the next 5 months I have some spare cash, can I put $5K from my own money to complete the $100K and pay less interests or that will be mixing my personal money and will lose the possibility of being tax deductible?

    Can I use part of the $100K in the future again for investment purposes again keeping all the interests as tax deductible?

    Thanks in advance
    Jat
     
  2. York

    York Finance Broker Business Member

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    Perthguy and Terry_w like this.
  3. thatbum

    thatbum Well-Known Member

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    So just clarify, how did your $100k in the offset account get there to begin with?
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    I would suggest you don't structure yourself that way.
     
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  5. Jat

    Jat Member

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    The $100K got there when I refinanced that property with the bank. It increased in value $100K so I put it in a offset account to have it available to buy another investment property or investment property expenses like the repairs in this case.
     
  6. Jat

    Jat Member

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    Thanks York, I read that link from Terry before. I understand you can't mix your money with offset account money and then redraw that personal money for personal purposes because it cannot be rectified (the drop of urine in the cup of tea is great analogy).

    However I'm still not quite sure I can put my own money to the offset account to minimise the interests and then when I need the money (for investments purposes only) use it without contaminating it and keeping the interests as tax deductible.
    Maybe I missed something.

    cheers
    Jat
     
  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    If you mix borrowed money with cash it will be contaminated.

    Don't park borrowed money in an offset account would be my advice.
     
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  8. Daniel Taborsky

    Daniel Taborsky Well-Known Member Premium Member

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    Yes you will contaminate it as after you have put your $5,000 back in the offset account you will have a mix of borrowed money and your own money sitting in the offset account.
     
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  9. Jat

    Jat Member

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    thanks guys for the assistance!

    cheers
    Jat