Splitting PPOR loan

Discussion in 'Accounting & Tax' started by Nad, 19th Dec, 2018.

Join Australia's most dynamic and respected property investment community
Tags:
  1. Nad

    Nad Active Member

    Joined:
    12th Feb, 2018
    Posts:
    30
    Location:
    Sydney
    I have a PPOR and the loan has offset and redraw facilities. The offset is also my transaction account which I use to pay bills, receive salary, access from ATMs etc. All these years I have been paying all my extra money into my PPOR loan account (instead of the offset) as I didn't like lot of money sitting in my offset (as it is my transaction account)

    After reading lots of valuable posts in this forum, now I believe I should have split my PPOR loan and kept extra money in the offset accounts although I have no immediate intention in converting my PPOR to a Rental property.

    Here is the current setup.

    PPOR Loan : 550 K
    Redraw available : 80K (due to my extra payments)

    I may redraw some of this (upto 50K) in the future for personal expenses.

    Given this situation,

    1. Is it better to redraw now and then split the loan ?
    2. Should I get my loan split into 2 so I can have 2 offset accounts link to the loan (one for each split). I can use one offset to park my extra money and other linking to my transaction (current offset account)
     
  2. Terry_w

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

    Joined:
    18th Jun, 2015
    Posts:
    41,675
    Location:
    Australia wide
    you should get some specific advice.

    you should avoid storing borrowed money in offset accounts.
     
  3. Nad

    Nad Active Member

    Joined:
    12th Feb, 2018
    Posts:
    30
    Location:
    Sydney
    Hi Terry,

    It won't be borrowed money but it will be my savings
     
  4. Terry_w

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

    Joined:
    18th Jun, 2015
    Posts:
    41,675
    Location:
    Australia wide
    in that case why do you want 2 offsets?
     
  5. Nad

    Nad Active Member

    Joined:
    12th Feb, 2018
    Posts:
    30
    Location:
    Sydney
    The reason is I don't like to keep all my saving in the offset account because it is also my everyday transaction account. All my transactions going in and out of that.

    If I open up another account and make it the offset account and keep the transaction account separate, I will loose the offset of few thousand dollars at any given time.

    That is why I thought to split the loan so I can make the transaction account as the offset of one split and a new account (where I can park my savings) as the offset of the other split.
     
  6. Mavis

    Mavis Well-Known Member

    Joined:
    25th May, 2016
    Posts:
    104
    Location:
    Illawarra, NSW
    Does your bank allow multiple offset accounts to be linked against the one loan?
     
  7. Nad

    Nad Active Member

    Joined:
    12th Feb, 2018
    Posts:
    30
    Location:
    Sydney
    I am with NAB and they don't
     
  8. Terry_w

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

    Joined:
    18th Jun, 2015
    Posts:
    41,675
    Location:
    Australia wide
    that would make no tax difference, but would be ok if you want to segregate different monies
     
  9. mikey7

    mikey7 Well-Known Member

    Joined:
    30th Mar, 2016
    Posts:
    1,173
    Location:
    Sydney, Brisbane
    I do this. I keep $x in Offset A which has a debit card, and the rest in Offset B (both linked to the PPOR loan).
    This is with Macquarie.. allows 10 offsets per loan, so you can have an offset for every occasion if that suits you.
     
    Terry_w likes this.