While you’re living in the home there is no real difference between the ordinary loan and the loan with an offset. But if you decide to move out of your home and rent it out there’s a huge difference for tax.
Imagine again that you had been paying off your $500,000 loan for years, but this time all extra repayments were put to the offset account. So the loan is now $300,000 with an offset account balance of $200,000 which means that the net debt is $100,000.
You redraw $200,000 for your new place and rent out your old place. Your loan would now stay at $300,000 and the deductible loan interest will be based on the net debt in your loan account of $300,000.
This is a much better tax result. It takes into account the possibility of future changes in your life and still gives you a good tax outcome.
Please call us on 1300 889 743 or enquire online if you’d like further information.\