Where should I park Equity extraction amount without losing tax deductibility for IP purchase?

I read most of the threads (even terry's ) before posting this. I've got more confusion as everyone's opinion is different on this topic.

Story is -
I've just applied for refinance and they approved for 2 parts on PPOR loan.
390K - say Loan1A ( P&I with offset account)
150K- say Loan1B (P&I only) - this is equity part.

Not sure how/where they will deposit 150K equity part.
I'm assuming they will ask me about where to deposit 150K at the time of signing docs.

So my confusion is where should I park (ask them to deposit) that amount and it will be used for IP deposit + other costs ?

Option -1) Ask them to deposit 150K into Loan1A offset. And I will not deposit any other amount into this offset until I purchase investment property. But this way, I'm not using my personal savings (close to 200K) to reduce interest on PPOR Loan1A.

Option 2) Open a new transaction account and ask them to deposit here. And don't mix with any other funds until IP purchased. This way, 150K is simply sitting here without saving any interest on my PPOR.

Please note, I'm not going for LOC & interest only loans.

Many thanks

 

A tax lawyers perspective is at
Tax Tip 1: Parking borrowed money in an offset account https://bit.ly/33l4o4c

 

Adelaide

 

Thanks Terry. I'm going through that channel but unfortunately I can't go for LOC & Interest only.
So I'm trying to find a way without those.

 

not sure why you say that as there is no distinction tax wise whether using a LOC or PI or IO loan

 

Sorry I did not mean that there is distinction tax wise but my point was - "The channel that you created for "Tax Tip 1" is possible with only LOC as per my understanding.
Then banks have only option to deposit that equity amount either in Offset account or nominated savings account but that is completely opposite to Tax Tip1.

 

The principals are exactly the same for any loan. Never park or move funds through other accounts without understanding the issue. A CLEAN offset is usually (should I say always ?) the best option. It stops the charging of interest so blending isnt even a issue. But could be later but if the offset inst tainted its all fine. Where, any funds dropped into a savings account doesnt stop interest being charged.

 

no

 

Do you have the option to not draw the funds down until you require them for your IP purchase.