Use IP offsets for part of PPOR construction cost?

I have two offset accounts for my IP. One has $170,000 in it, the other has about $100,000.

From a tax and good practice perspective, can I use the funds to pay for construction of my new PPOR?

The $100,000, is against my PPOR so it might be considered dodgy to do a knock down rebuild using this offset?

 

The cash came from my salary.

 

You sure can, and the increased interest on the investment loans will be deductible (generally).
Tax Tip 82: Taking money from an offset account on an IP and Claiming Interest Tax Tip 82: Taking money from an offset account on an IP and Claiming Interest

But Rolf raises a good point - borrow if you can as this can help you get around the cash out restrictions. Split the loans appropriately, and once settled pay them off and then reborrow to invest at owner occupied rates.

 

There aren't any cash out restrictions though, are there? It’s just an offset account against the loan. I haven't redrawn - just had my salary paid in.

Later edit - thonking about it, I understand that on the one hand taking the cash out of the offset would mean I would be paying the slightly higher rates for the PPOR because the IP has a slightly higher rate. This might be offset by the higher deductions on the IP I guess.

But if I reborrow against the PPOR I get lower rates and deductibility?

 

You've missed the point.
You keep the offset as is
Borrow against the main residence - extra borrowings so cash out restrictions apply, but with building you have a good reason.

After the loan is drawn down pay it off, and reborrow at owner occupied rates and apply these funds to the existing investment loans, yet still maintain deductibility.


See
Strategy: Borrow Against the Main Residence for an Investment Loan (Shuffling Loans Around) Strategy: Borrow Against the Main Residence for an Investment Loan