impact of offset a/ct on IP

Yes.

Hi Samson

An offset account allows you to reduce the interest you pay on your IP loan during the period the money sits in the account.  The benefits of the offset account from a tax perspective is as follows:

Lets say you have managed to save $50,000 in an offset account and your IP loan is $400,000, though during that time you have also reduced your interest which inturn also meant you reduced your tax deduction as in effect you only paid interest on $350,000, if you then chose to take that $50,000 back and pay for a really expensive trip, this will have no impact on the IP loan, it will remain at $400,000 and you will continue to claim interest on $400,000.

If on the other hand you did not have an offset account and you placed the $50,000 towards the IP loan, the tax office will deem this as a reduction in the loan to $350,000 and when you redraw the $50,000 for the Trip, the tax man will only allow interest on $350,000 even though your loan is now back to $400,000 as the trip is a personal expense unrealted to IP.

Hope this helps, should you have any further questions please feel free to contact me via my website http://www.akagroup.com.au