I am currently having loan on my PPOR, which is the one with REDRAW facility (NOT offset). I plan to build a new house next month (April 2013), and then rent my current home out. Because I have already transferred a lot of money into my loan account and some one told me once I transfer money to the home loan account, I can not claim tax deduction for interest occured on this part. My situation is detailed as follows. Can you please give me some advices on how to legally minimise my tax. Any of your advice would be much appreciated. May 2012 – I settled my current home at value $430,000. $315,000 is loan amount; $115,000 is deposit. My Loan is with Commonwealth with REDRAW facility (NOT offset) May2012 – I transfer all my remaining savings $200,000 into home loan account to avoid interest. At this stage my loan balance is $115,000 ($315,000 – $200,000) with $200,000 available to REDRAW. From May 2012 to March 2013 – I transferred all my and my wife’s salary into home loan account once we got it (About $80,000 in total) and use redraw facility to pay our daily expenses (Buy Cars, travel, food. Etc…) March 2013 – I requested bank to refinance and transfer my REDREAW home loan to an Offset home loan. The property value is still 430,000. So, my current loan balance is that $344,000 is loan amount, 86,000 is deposit and $220,000 is sitting in Offset account. In future, I want to transfer this PPOR to an Investment Property and rent it out at $460/Week and use $220,000 in offset account to build a new home. Let assume interest Rate is 5% So the taxable income = $460 *52 = $23,920. But what about deduction? If I can not claim interest on the money I have already transferred to home loan. the deduction can only be $1,750 (315,000 – 200,000- 80,000)*5%, even if the interest I paid is 17200 (344,000*5%). Is it the way to calculate the deduction of interest? If this is the case, Should I set up a family trust and transfer this home to the trust, can this way clear the ‘repayment history’?