Tax Tip 1: Parking borrowed money in an offset account

That was what happened to me when I refinanced. The equity was deposited to my ppor offset account.

Luckily I noticed it and put the whole amount back to the investment loan a day after, and has been redrawing from it directly to pay for IP related expenses (WBC allows direct money transfer from the investment loan).

 

Wbc is one of the good guys

 

Evening PCers I just want to check I have the above figured out. If I created a new loan against my PPOR with an offset and deposited all of the loan into the offset then it should be deductible if the funds are used for an investment property, assuming there were no other funds placed into the offset and the offset was only used for investment. Note I have a seperate loan and offset that I use for non investment purposes against my PPOR.

What if I used the funds for deposits for 3 seperate investments ? if I kept track with an excell sheet of where the funds went can I allocate interest to each investment ? I know this would be complicated but it would be difficult to do it any other way at the moment.

I also already have 17 bank accounts and really don't want to create anymore than I need to.

Thanks Logan

 

The answer is maybe - best to avoid this.

 

assuming the interest is deductible then see:
Tax Tip: An issue with mixed purpose loans where both portions are investment. https://propertychat.com.au/communi...oans-where-both-portions-are-investment.3191/

 

Thanks @Terry_w i wish I could avoid it but seems unavoidable with the timeframe and remaining serviability I have

 

Carrying over from the other thread @Terry_w if I have a split mortgage for properties A, B and C and the redraw into accounts A, B and C which are each solely and individually for the purpose paying expenses on properties A, B and C (i.e. no mixed purpose/mixed funds) this will probably be allowed by the ATO?

 

Well the loan will be mixed I think but all portions may be deductible as long as no cash has ever been placed in those accounts, including rents.

 

Thanks Terry, we'll need to have another sit down when the next purchase comes along!

 

Hi @Terry_w to bring up an old thread

I am looking to borrow to buy a PPOR which will then be moved into and 6 months later will be rented out to avoid Capital gains tax keeping this as my PPOR for 6 years.

My question is I am looking to borrow more LVR and then park this borrowed money into my offset account against this property. This should not create any issues if I rent it out as my PPOR is that correct?

 

See above. This is what the whole thread is about. There will be issues if you want to claim the interest.

 

What do u mean by "depositing unborrowed funds into the offset account"? How does this occur without ur knowledge?

 

people deposit money into the wrong account all the time. I have done it myself several times.

 

The bank decided to start depositing money in my offset account. It was not borrowed funds, it was just money the bank decided to give us every month for no logical reason. No choice. They then informed me I had no choice of which account. They chose. It was all rather silly and the whole scheme has been cancelled. Not before contaminating my borrowed funds though.

 

great food for thought this thread, thanks ! Can I get an opinion on whether my thinking below is on track ?

Currently have a loan for IP and offset account (all salaries, rent go here) and no PPOR
Bought an IP at, just for example, 150k, bank revalues at 250k, so I now have equity of 100k I can draw on.
I would like to use this to:
- fund deposit for next IP purchase
- fund renovations on current IP
- pay IP (both) running costs and PM fees in future
- all of the above if it possible

To avoid risk of contamination and simplicity for tracking finances do I

1) ask for LOC of $100k (is this even allowed when you have an offset account?)
- then I don't have to worry contamination, the purpose of any draw downs would be for investing

2) ask for a new 100k loan, with its own linked offset account (seperate to my existing offset acct), for them to deposit the funds into. Just before that, I move everything in my offset account to a savings account (with another bank) and redirect rent/salaries to go into that account instead. This way even if the bank makes a mistake and dumps it, it will be into an empty offset account and I can recorrect it without it contaminating anything ?
This will create a bit of work, so if there is an easier suggestion would like to hear it !

Or just a thought, could I ask the bank to deposit the new 100k into the savings account with another bank (it will be empty). That way I can keep my current offset account arragements. And then transfer the 100k back into the new offset account - so I can do it myself and not depend on the bank ? Or is that just silly ?
Thanks !

 

forgot to add, the reason I want to save my cash is because I'm looking to purchase a PPOR later on, could at in 12-18 months

 

LoC!

This whole thread is about the dangers of borrowing money into an offset account...

 

short and sweet, thanks !
I was under the impression you could only either get an offset or a LOC attached to one loan/property.

Would the bank be likely to lend more for LOC or offset ? Or would they use the same rules to work out serviceability ? And the interest the bank charges on LOC, could that be more, less or can be the same as what you'd pay with offset account ?
Thanks !

 

If you borrowed to park in a savings account in another bank you would be paying interest on the loan, but the income received would be much less, so the claim of the interest incurred would probably be limited to the interest received from the other bank.

 

Thanks Terry
If I was going down this route, I would be aiming to transfer the 100k back to the new offset account immediately or asap (a day or 2's interest at most!)