Transfer owner occupier offset to investment loan

Discussion in 'Loans & Mortgage Brokers' started by Investor_84, 20th Jul, 2018.

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  1. Investor_84

    Investor_84 Well-Known Member

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    I have a $100,000 owner occupier mortgage but I have a $100,000 offset to it. The rate is 3.79% but that won’t make a difference because the offset matches the mortgage.

    The other loan I have is an investment loan with a 500,000 mortgage and 25,000 offset. The rate is 4.89%. I’m paying this rate on the difference so $475,000.

    If I transferred the $100,000 owner occupier offset to top up my investment offset would the interest I pay now on my owner occupier mortgage be tax deductible as the funds are being used for an investment loan?
     
    Investor_84, 20th Jul, 2018
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  2. Terry_w

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

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    No.

    But if you paid down the loan, without closing it, and reborrowed to pay into the investment loan the interest would be deductible and you will save money.

    I have written 2 relevant threads on this in the past
     
    Terry_w, 20th Jul, 2018
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  3. MWI

    MWI Well-Known Member

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    No, no, no as Terryw said.
    My understanding is, if owner occupier mortgage is for your place where you live, your PPOR, not an investment property generating income, you cannot do that.
    It's the use/purpose of the loan that dictates the deductibility. Where you live does not represent an income generating asset....you live there (hence why we comment PPOR loan is non-deductable debt whereas IP is).
    It is interesting that's how our government defines its laws. I always thought it strange, we are penalised for paying interest (after tax money) on our PPOR yet rewarded for paying interest on IP. But then I looked from other perspective.... we are in business providing a roof over someone's head, we run a property business, hence like other businesses we should be able to claim expenses associated with it (why penalise just property investors and reward other businesses?).
     
    MWI, 21st Jul, 2018
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  4. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    no, since thats not a new borrowing.

    Unless you cycled that cash through the actual PPOR loa, created a new loan split and thence bought a new income producing asset with the same new loan split.

    This is a common one off debt recycle strategy, and works for those with fully offset loans and those with some small equity or paid off equity.

    Pls seek specific tax advice

    ta
    rolf
     
    Rolf Latham, 21st Jul, 2018
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  5. Terry_w

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

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    Make that 4 threads

    Tax Tip 88: Use cash in offset to invest or pay down loan and reborrow? Tax Tip 88: Use cash in offset to invest or pay down loan and reborrow?

    Tax Tip 9: Don’t use Cash in Offset account to Invest Tax Tip 9: Don’t use Cash in Offset account to Invest

    Strategy: Don’t Keep Large Sums in Offset Accounts Strategy: Don’t Keep Large Sums in Offset Accounts


    Strategy: Borrow Against the Main Residence for an Investment Loan (Shuffling Loans Around) Strategy: Borrow Against the Main Residence for an Investment Loan
     
    Terry_w, 21st Jul, 2018
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