Have I made an irreversible mistake?

Discussion in 'Accounting & Tax' started by property_geek, 4th Dec, 2018.

Join Australia's most dynamic and respected property investment community
  1. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    23,319
    Location:
    Sydney
    Depends. Which monies were used to settle ?? Its likely to be fine if the second proceeds also credit the trust. and the repayment corrects the original mistake. I cant see Part IVA applying to a acknowledged correction of a evident error in payment.
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    41,670
    Location:
    Australia wide
    I think best to bypass the trust account altogether as if more money deposited in that will be mixed - when paying out at settlement won't be able to say if it was the first lot of money held on trust or the second or both.

    So when settlement happens best to avoid paying anything from the trust account.
     
  3. property_geek

    property_geek Well-Known Member

    Joined:
    31st Jul, 2015
    Posts:
    239
    Location:
    Australia
    Thanks @Terry_w and @Paul@PFI

    one more question related to this:

    If I refinance this property with a different lender 1 year down the line, would it fix the problem?

    The new lender would payoff existing loan(including the loan that’s causing non deductible interest) and create a brand new loan. 100% of which would be tax deductible.

    is this correct?
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    41,670
    Location:
    Australia wide
    no

    refinancing doesn't change deductibility of interest.
     
  5. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    23,319
    Location:
    Sydney
    But if the blended issue is unblended then it wont get worse and you can direct extra repayments to the non-deductible loan and maintain the max deductible balance perhaps. Or use the offset against the non-deductible portion (only)