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Stupid Qs - Put loan money back so accessible from Redraw?

Discussion in 'Accounting & Tax' started by EN710, 23rd Sep, 2015.

  1. EN710

    EN710 Well-Known Member

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    Hi guys,

    I have stupid question. :oops:

    Obtained separate loan for IP deposit (PPOR as security).

    The loan money is paid to the attached offset account. SO, to make sure I maintain deductibility, I should pay that money back to the loan so it's available from the redraw, then use this to pay deposit etc?

    To summarise - current setting

    Offset: $50K
    Loan: -$50K
    Redraw: $0

    So I need to make it
    Offset: $0
    Loan: -50K
    Redraw: $50K - use this to pay all purchase cost?

    Is this correct?
     
  2. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Yes, But always check you have a redraw facility and the lender wont close the new account when the balance is fully repaid !!.
     
  3. EN710

    EN710 Well-Known Member

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    They do,

    But per call with them any fund I put in today won't be available for transaction until tomorrow .... even if it came from my Offset with them :confused:
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    EN710 likes this.
  5. melbournian

    melbournian Well-Known Member

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    hi terry - i like that post

    "Some have argued that where the savings account is empty then there will be no co-mingling of borrowed and non borrowed funds if the loan is drawn down into this account. This is true, but where interest is incurred on the borrowed funds it cannot be deducted as there is no income, or commercial income generated. However where the savings account is an offset account there is no interest incurred at all as the borrowed money is in the offset offsetting the loan. If this borrowed money is later used for investment then the interest will start to be charged on the loan. I think this interest can be traced to the investing and the interest should be deductible (assuming no mixing)."

    as i am investigating the option of this through home loan split (offset + withdraw). i might call up the ATO to ask a question and get a reference or write in for a private ruling.
     

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  6. EN710

    EN710 Well-Known Member

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    Thank you @Terry_w just want to make sure I get it right ;)
     
  7. Perthguy

    Perthguy Well-Known Member

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    Not a stupid question at all. People get this wrong all the time. :)