what tax implications taking out of one IPs redraw to place into other IPs offset?

hi all
i have $54,000 in one of my IPs redraw which i am wanting to take out in the next few days, to put into the offset account of my other IPs offset account. this is because i am changing the first loan into a basic 2yr fixed but don't want to 'absorb' the extra $54,000 into it. The second IP, i am considering moving back into at the end of the year to take advantage of the 6yr rule but am not planning on doing anything with the money in that offset account (including this $54,000 i hope to put there) until another year after that ie 2yrs from now

my question is, does anyone see any tax implications here? i have read a few things on the forum here but still not 100% clear

thanks in advance!

Yes. The extra tax on the new loan, ie the redrawn amount, will not be deductible because you will be borrowing it and placing it in a savings account.

Regards

Terryw

thanks for replying, terry
so do you see any other way that i could handle it? or am i best to leave the loan as it is with all the  'bells and whistles'  ie offset and redraw facility? is the $54,000, where it is at the moment, deductible? or if i was to take it out at a later date and put it up as part of a deposit on another property, IP or PPOR, (does this make a difference?) which is something i am contemplating, would that still be a tax deduction?

thanks!

What are you trying to achieve?

Regards

Terryw

hi terry
i want to lessen the payments on my second IP by  locking in a good rate but don't want to lose my $54,000.
the first IP has obtained the most growth in value and will be the one that I will definitely keep long term and perhaps even move back into at the end of the year. the $54,000 plus savings i have, will make a great deposit on another property but i am wanting to wait a year or two while i study and change careers. in the meantime the money would sit in the offset account of my first IP (which my become my PPOR for 3-6mths) lessening my tax on it for that time period.

confusing much?!?!?

thanks

It seems you've paid extra into the loan, so that $54k cannot be reborrowed without considering the tax implications. If you reborrowed it for the next IP then the interest would be deductible, but not if it is used for personal expenses.

Maybe you could set up a fixed loan based on the amount excluding the $54k and keep that variable and available in redraw. While you are at it you might as well make sure all loans are IO and set up a 100% offset account attached to the one you may live in next. This will help you save interest without all the tax problems.

Regards

Terryw

thanks for that terry
i had a thought...what if i take it out of the redraw at IP no. 2 and place it into IP no. 1 redraw instead of in the offset of IP no. 1? i don't want to touch it to live off or personal expenses, and that would show on my bank statements and it is still against an IP.....what do you think?

If you borrowed it and place it into another investment loan then it would be just a refinancing of part of the debt. deductbility should be the same but you may still retain access to the funds if the second loan has redraw.

But you would be required to aportion the interest between the 2 and it would get complicated if you were to ever live in the 2nd property.

Regards

Terryw

thanks terry,
do you mean  if i ever live in IP no.2 (the one i'm taking the $54,000 out of)?

no, the other one.

If you borrow from IP 2 and put it into IP 1 and then live in that then the interest on the extra borrowed from IP2 wouldn't be deductible.

Regards

Terryw

thanks terry
i appreciate you explaining it all