Hi Tax experts, Are cashback from banks offered when switching lender considered as taxable income ? or is this treated as a gift by the ATO ? Many thanks
Good question and couldn't find a definitive answer via google. Did come across that gifts under 14k are non taxable.
its not a gift but a reimbursement for costs incurred in refinancing. Likely not to be assessable income Check with your tax lawyer.
Its not assessable income as it lacks the definition of income. However it may act to diminish the net deductible as it is a reimbursement. The other complicating factor is borrowing expenses (net borrowing cost incurred by the taxpayer) is deductible over 60mths. The other issue is some costs incurred to switch loans are NOT borrowing expenses but may be capital expenses for legal costs. So lets say you incur total borrowing expenses of $2500 to shift lenders and Westpac credit you $1500. Your net expense is $1000. The following may be issues 1. Balance of borrowing costs for the former loan may be triggered as deductible 2. Total borrowing expenses less reimbursement may be new net borrowing expenses (deduct over 60mths) 3. Some of the bank fee may be for legal costs. In that case this is not assessable but there is no new CGT cost for title changes etc as the legal fees may have been reimbursed by the bank. You may need to apportion between borrowing and legal costs. to arrive at the crrect values for 1 and 2 above. Depends what the nature of the payment is described as and what you incur as costs. If the nature of the loan is either private then no issues arises. If the refinance reflects both non-deductible and deductible loans apportioning of the bank contribution and fees etc would be needed
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