New refi funds put into everyday account by bank

Morning guys,

Got a question for the tax guru's like @Terry_w..

My refinance settled on Tuesday, and yesterday I had new funds appear in my everyday transaction account ($150k). Today, the loan accounts have appeared, fully drawn.

So it looks like this:
Everyday account: $160,000
PPOR: -$amount
IP LOAN1: -$100,000
E LOAN: -$50,000

(The E loan is an emergency account which I don't intend on touching unless for emergencies, as this current setup doesn't have an offset account.)

So this morning, I have simply transferred the $150k into the relevant accounts in which they would have come, with the narrative 'Payoff - recycle'.

So now it looks like this:
Everyday account: $10,000
PPOR: -$amount
IP LOAN1: -$0
E LOAN: -$0

Is this OK to now use IP LOAN1 for investment purposes? Or has the bank stuffed up, and I need to do something else?

When speaking with the bank person and signing docs in their office, I made it clear that I wanted the funds to stay in their accounts and be available for when I wanted it. She seemed to understand.. But then had some confusion with other things where she needed to ring the broker.

Really hope it's all good at this early stage.. The way I understand it is that the money from IP LOAN1 wouldn't be claimable if it came out of my everyday account to pay for the IP costs anyways..

Can anyone clarify please?

Mike

 

Which bank?

This is something I warn about and a reason why a LOC is a good thing to use.

If you have paid back the loan so that the loan balance is nil then you can start again, afresh. When you take the money out of the loan next time it will determine deductibility of interest.

 

Yeh sweet, that's what I thought, thanks. All is good then.

It's Westpac.

 

Unless they close your loans

 

Westpac should be right with paying down to nil without closing the loan - but check with them before you do this.

 

If you have full redraw rights thats the correct way. I usually advise clients to call and confirm before doing this as bank systems can close a loan when it gets to 0.00

Plan B would be to arrange with Wpac for a offset linked to that loan and park the $150K in the offfset with NO OTHER $ until it is used.

 

I'm fairly certain this is the way it was setup.
I can't do offset if I want to keep the rate I am on. Its like another 1% if I want an offset.

Each one now says, respectfully, $50k and $100k available, with $0 balance.

I did it as soon as the accounts appeared in my login - I don't want to accumulate interest on something I'm not using. I'll call them now and make sure they don't close them.

 

With Westpac they won't close them so you should be all good. Banks do this all the time - you can ask them not too, but they'll do it anyways. Very frustrating but usually easily fixed.

 

Yeh thanks heaps Jess. Lady on the phone from Westpac said the same thing.
Now to start making some offers for an IP!

 

Have had loan accounts closed by paying down to zero via redraw and managed to get it reopened. Always best to check with bank as some require a minimum balance to remain open.

I used to request funds to be made available as redraw and told yes but funds where still put in the offset / transaction account.

My accountant says you can get away with murder in this country if you dont get caught. Same applies to this topic as it is rarely checked but best to do it right from the outset.

 

Colin - it seems you can get away with murder even if you do get caught - but that is a story for another day.

What your accountant meant, probably, is that you can claim anything and may get away with it if there is no audit. Even if audited it is probably unlikely they will dig too deep. I had a client who did some silly stuff destroying deductibility of interest - he got audited but they didn't dig too deep.

 

His exact words where "they do not check anyway" but best to be safe than sorry.

I estimate 90%+ loan structures and the movements of funds are not 100% correct.

 

I think you might be right!

 

@wylie - its the same product but for investment loan.

The term Rolf used is for OO.

 

But then you have another problem - withdrawn funds - where do they go?

I think with the Westpac Roket products money can be paid out directly from the loan to its destination via bpay, transfer etc.

 

That sounds ok if you want to refinance LOC debt, but if that is not want you want you could be reducing deductible debt.