ANZ refinance rebate went into loan account

Discussion in 'Accounting & Tax' started by milobear, 25th Feb, 2020.

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  1. milobear

    milobear Well-Known Member

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    Hi,

    About a year ago my partner refinanced one of her IP loan to ANZ. At the time there was a 3.5k rebate which was put into her IP loan account rather than transaction account (not sure why they did this). The 3.5k is currently available as a redraw. Am I right to assume that if this amount gets withdrawn, that portion is not tax deductible if we transfer this to our OO loan offset?

    Thanks
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    redrawing is borrowing, so deductibility will depend on the use to which the redrawn amount is put. If you borrow to pay into an offset the interest won't be deductible
     
  3. Blueskies

    Blueskies Well-Known Member

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    Have you considered drawing down that amount to pay expenses related to the investment property, eg. Repairs, capital works, rates, insurance etc, it's a small amount should only take a year or two to use it up?

    Not financial advice.
     
  4. milobear

    milobear Well-Known Member

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    How would this need to be done? Not sure if you can make payment out of the loan account. Could you pay with credit card and then send the same amount to the credit card account?

     
  5. Blueskies

    Blueskies Well-Known Member

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    No that would be a poor way to do it. You would pay bills using bpay or direct transfer direct from mortgage account.
     
  6. milobear

    milobear Well-Known Member

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    Does monthly loan repayment count? for example redraw into the IP loan offset, and monthly repayment for IP loan comes from the offset?
     
  7. Blueskies

    Blueskies Well-Known Member

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    Likely not, search the forum for threads on capitalising interest, generally not allowed
     
  8. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    In this instance it could be allowed as its not likely to be a Part IVA concern. A binding private ruling to address the Part IVA issue may be prudent. It can be done for free online. The key element is explaining how it arose and was a bank created problem and that the drawing would taint the deductibility unless the payment was a incurred outgoing.

    However, that said since the rebate is non-assessable taxpayer income the ATO may consider the portion of interest related to drawing out the non-assessable non-exempt income and may consider the blended loan portion is non-deductible on that basis.

    It may be easier if you give the bank a rectal rocket and have them correct the issue by reversing the deposit and crediting a savings account etc. I would consider reducing a loan is NOT giving a rebate. Its potentially dishonest and contrary to the terms of the offer ?? This may be something to escalate to a dispute with the bank.