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CBA surplus funds into offset account

Discussion in 'Accounting & Tax' started by menty, 7th Jun, 2016.

  1. menty

    menty Well-Known Member

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    I have refinanced a loan to CBA with multiple split loans, and they have just dumped all the surplus funds into my offset account. This is still borrowed money!

    In my previous experience with other banks, any surplus money had been stored in an additional redraw? account?

    Iv been advised to set up a few other offset accounts against the split loans and transfer the CBA surplus funds into them. Is this correct, or should I be paying the surplus funds into the split loans themselves?
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    You should be seeking tax advice asap.

    I am trying to fix the same problem for a client with NAB at the moment.

    You need to get CBA to reverse the transaction so that it never happened. Don't simply transfer the money yourself or you could be further mixing a mixed loan.
     
  3. menty

    menty Well-Known Member

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    If I can get them to reverse it , can they deposit the money into the offsets against the split loans, or should I get them to it as a redraw?
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    I am not sure of your situation - seek specific advice.
     
  5. S0805

    S0805 Well-Known Member

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    As Terry said, seek specific advise however I'll be keen to know if they do this. My understanding is once transaction happened they can't delete the entry...you may not have any other option that do the refinance again and hope they get it right next time....
     
  6. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

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    Certainly don't need to do a refinance all over again. You just pay down the loan to $1-1000, then draw the funds out when necessary. This will cycle the money through as new borrowings and solve any issues re; deductibility - it doesn't need to be made that complicated.
     
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  7. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Agreed!
     
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  8. S0805

    S0805 Well-Known Member

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    Corey, just so i understand this. i am not sure if op had personal money mixed with borrowed money in offset. But lets say that is the case and offset had 1K before borrowed money was mixed....you r suggesting op to pay down borrowed money $$ from offset to loan & redraw it again....
     
  9. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

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    I'm suggesting paying down the loan account to ~$1000 for the investment loan/s, then drawing from it when needing to use the investment funds in the future. Redrawing from the loan account is counted as new borrowings, so if the funds are redrawn and used for investment purposes it's a clear link as to the use of funds and potential tax deductibility.

    You don't want to pay the loan to $0, because many lenders will automatically close the loan account.
     
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  10. legallyblonde

    legallyblonde Well-Known Member

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    Surely tax law wise those funds are still mixed.. Might swing the percentages in your favour in terms of deductibility.. But doesn't take the urine out of the orange juice ;)
     
  11. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    It all depends.

    It looks like Menty has borrowed say $50,000 and this has been deposited into an account containing other cash. If that is the case it is a mixed purpose loan.

    The only way to fix would be to pay it off and reborrow.

    This is easily done by paying down the loan to nil. Some banks will close the account if this happens, others wont'.

    Menty's loan is $50,000
    Pays down to $1,000
    Borrows $49,000 and invests

    It will still be a mixed loan but 98% of it would be deductible.

    I gave tax advice today about this exact thing, but I told the client to pay the loan down to $100 instead - to make 99.99% deductible

    You also have to be careful about direct debt timings. Imagine you paid it down to $100 and then an automatic direct debt sweep transferred say $500 into the account - it would be paid off in full.