Offset vs Redraw
Offset preserves your deduction; redraw can taint it. They are not the same.
Definition
An offset account is a separate transaction account linked to your loan — its balance reduces the interest calculated on the loan, but the loan balance itself doesn't change. A redraw facility allows you to withdraw extra repayments you've made on the loan. The critical tax difference: withdrawing from an offset preserves the full loan purpose (deductible). Redrawing from the loan creates a new borrowing whose purpose is determined by what you use the funds for.
You have $50,000 in extra repayments on your investment loan. If you redraw $50,000 to renovate your home (personal), you've just made $50,000 of the loan non-deductible. If instead you'd kept that $50,000 in an offset account and withdrawn it, the loan deductibility wouldn't change at all.
Related reading
Related terms
TR 2000/2 Interest Deductibility
ATO ruling on when loan interest is deductible — purpose of the loan matters, not what secures it.
Mixed Purpose Loan
A single loan used for both investment and personal purposes — splits the interest deduction.
Negative Gearing
When your property costs exceed rental income — and you claim the loss against other income.
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