Offset Account or not?

aan offset is a savings account  so if you have used money from an offset then there is no interest incurred. it is like using cash.

but if u take money out of an offset the interest on the loan it is attached to will increase  so indirectly interest is incurred.

if the loan is investment then it will result in savings. if the loan is not deductible then there will be no change in deductibility. the interest on the home loan will increase however and this extra interest wont be deductible which means you will be losing out. therefore it is better to borrow to pay investment expenses rather than use offset money

aan offset is a savings account  so if you have used money from an offset then there is no interest incurred. it is like using cash.

but if u take money out of an offset the interest on the loan it is attached to will increase  so indirectly interest is incurred.

if the loan is investment then it will result in savings. if the loan is not deductible then there will be no change in deductibility. the interest on the home loan will increase however and this extra interest wont be deductible which means you will be losing out. therefore it is better to borrow to pay investment expenses rather than use offset money

Hi Jamie & Terry,

Thank you kindly for your insights. It surely does place the picture in perspectives.
I basically don’t have any non-deductible loans & have used the loan against my PPOR which has an offset account as a LOC.
This loan is only used for investment purposes (eg. 20% deposits for other IPs, renovation costs for IPs, etc). Our monthly salaries are deposited directly into the offset account (as I don’t have any other non-deductible loans) and parked there until I find good use for it.

All my other IPs, I’ve taken a loan of 80% against the individual IP as security as I was advised that it best not to have cross-collateral loans. My only doubt is that when I use funds from the offset account for IP related expenses; do I really have to move the funds into the PPOR loan (which is an Investment Purposes loan) & do a withdraw of it? Being with CBA, minimum withdrawal amount is $500 & many times I have very small IP expenses which I transfer out directly from the offset account (which increases the PPOR loan & hence has the same effect of drawing it).

I do hope you understand what I’m trying to explain & let me know if I’ve not been very clear. Once again, appreciate your expertise advice as usual.

Cheers’
NM7

Hi Terry,

As mentioned, I use the loan secured against my PPOR as a LOC and fund 20% + extras (eg. stamp duty, etc). The PPOR loan does have an offset account and I dump all our incomes into that offset account to reduce the interest payable on the PPOR loan (which I know is deductible but why pay more interest on it if I can reduce it).

Regards,
Nish

Thanks for the updates Terry – yup, I ran it passed my accountant who had similar views as well.