Fastrefi and tax

Hi Guys,

I have loans being moved to Suncorp soon and understand that FastRefi will be applied. I understand that the new loans have an additional buffer to allow for payment on the monthly payments on the old loans (ANZ). Any additional funds are then refunded.

My question is what tax treatment is applied to that refund? Is it being refunded by ANZ as an overpayment on the existing loans, or is does ANZ refund it to Suncorp direct and counted as part of the funds from the new loan which would need to be kept separate for tax purposes. While the loans are I/O, i'm guessing it may be wise just to pay the refunds back on the loan to avoid future problems?

Any thoughts?

 

Interesting question

It is borrowing extra money so if you don't use it to reduce the loan you would end up with a mixed purpose loan.

 

In a standard refi it is common practice to borrow a bit extra above the current loan amount to cover all pay out all costs. Any surplus is technically not automatically tax deductible but in practice probably is claimed as most people don't get that granular.

In this case the surplus will be returned to you directly by ANZ post settlement. If you want to be compliant you should pay the funds into the new loan and then never use the redraw.

 

Thanks everyone.Better to be safe than sorry, so back on it will go.

 

Can the refund be used to make monthly repayments on the I/O loans rather than as an additional payment? The money is still being used for the loan purpose, or is the interest treated differently?

 

That would be borrowing to pay interest which is basically capitalising interest

Tax Tip 16: Capitalising Interest Tax Tip 16: Capitalising Interest