I think I just made a boo-boo (redraw)

G'day all,

Recently had my loan split from 2 accounts to 3 and added an extra offset facility to one of the new loan accounts. When trying to transfer money from my existing offset into the new, I accidentally transferred it directly on to the loan itself.

My limited understanding is that if I redraw this money now the interest charges from this loan account will no longer be tax deductible?

I've tried to speak to St George to see if they can "undo it" but they weren't too forthcoming with assistance.

 

If it can't be reversed cleanly, the interest will still be proportionally deductible.

Alternatively, if you have another investment planned, use the redraw for that new investment and deductibility will be preserved.

 

Just transfer it back to the offset and when you need to use the funds in the future place back in home-loan account and then "re-borrow" by redrawing again.

Check with your accountant first and hopefully they can comprehend.

 

Loan amount was only 32k - I had attempted to transfer the full 32k into the offset so the loan amount is now effectively 0.

I guess I will just keep it there until I need to buy some other investment as it seems like the simplest way for the time being to avoid any messy tax implications.

 

Check with bank that the loan account will not "auto close" as some it will and the loan will no longer exist as system thinks it has been paid out.

Put back in offset asap to be safe.

 

As long as the loan account you transferred to is bigger than 32k... otherwise paying 32k into it will effectively close it. I've done that once; a quick call to CBA and they reversed it, and kept the loan open.

 

The damage is done. You have tainted the loan and severed the deductible amount by repaying. Unless the bank will revrse the entry that made the mistake you have a problem.

You may need to leave the offset funds as a redraw balance in the loan and then later when a deductible use occurs then a new borrowing occurs. The ATO dont accept the excuse of making a mistake. Its a issue of fact. You repaid the loan.

 

Gave St George another call and explained the situation (tax implications) and thankfully the lady on the line was much more helpful - sent a signed letter to loans administration and they will reverse the transfer as it was made in error. I believe this will mean no issues with ATO as I'm technically not using redraw facility and there's record of the transaction occurring in error.

 

Good news. Its often best to make that personalised contact asap as they can often do a lot to correct these things.

 

Yes you have paid down the debt so redrawing will amount to new borrowings and the interest deductibility will depend on the use the borrowed funds are put to.

 

I suggest renaming your accounts so it is really obvious what each is for.

 

I name each account with the street addresses so I don't mix anything up.

 

Me too - but this can also lead to mistakes - because a loan with an offset will have two accounts with the same street address!

Each account needs to highlight if it is a loan or offset e.g. '23 Smith St LOAN' and the offset as '23 Smith St OFFSET' or similar.