Offset account vs redraw

Discussion in 'Loans & Mortgage Brokers' started by Oliver, 19th Jul, 2017.

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  1. Oliver

    Oliver Well-Known Member

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    Hi,

    I just signed up for a loan with NAB and I am a bit confused about the 2 accounts provided. There are a loan account and a classic one that goes with the debit card.
    I'm suppose to have an offset account so I already moved some of my money into the loan account.
    However it seems that I may have put my money on the redraw account (loan account) but I don't know the implications.

    How can we make sure which one is the offset account?
    Once the money moved to the loan account, do I need to pay some tax to move this money?

    Many thanks
     
    Oliver, 19th Jul, 2017
    #1
  2. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    there may some tax implications depending on the scenario, but the main one is

    Offset = your money and usually stays your money unless YOU default

    redraw =your money which then becomes the banks money and they give back to you if you AND the market meet conditions

    ta
    rolf
     
    Rolf Latham, 19th Jul, 2017
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  3. Oliver

    Oliver Well-Known Member

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    What I still don't get is that once the money moved to the loan account, I have then the possibility to redraw, meaning this money may not be on the offset but neither in the redraw account?
     
    Oliver, 19th Jul, 2017
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  4. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Redraw account per se isnt a separate account.

    Its part of the loan

    say u have a loan of100 k and 10 k in redraw ,the loan balance is now 90 k and redraw capacity is 10 k.

    Offset with most ADI lender is a discrete savings account linked to the loan

    ta
    rolf
     
    Rolf Latham, 19th Jul, 2017
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  5. Terry_w

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

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    By paying into the loan you have made a repayment of the principal.


    If you take this money out by redraw you are reborrowing the money. It is considered a new loan for tax purposes so the interest on this redrawn amount relates to whatever the redrawn money was used for.

    If the loan was an investment loan and you have redrawn to buy groceries it will now be a mixed purpose loan and the interest would need to be apportioned between the 2 uses.
     
    Terry_w, 19th Jul, 2017
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