Based on the facts presented, it would
still be deductible (subject to the normal rules about the protect being rented out at normal market value rates etc etc)
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Hi TaxTalk1234, thank you so much for your clear response! That is very reassuring.
However, my accountant recently expressed a conflicting view, which is causing me some concern.
My accountant claims that because the offset account was fully topped up and the net interest dropped to $0, the ATO would view the underlying investment loan as effectively "paid off" during that period. Therefore, they argue that any interest generated after withdrawing funds from the offset account cannot be claimed as a deduction against the rental property anymore.
Could you please help clarify if my accountant's view is correct? Does a fully topped-up offset account change the tax status of the underlying investment loan, even though no money was ever paid directly into the loan account and no redraw was used?
Thank you again for your valuable help!