Offset accounts and credit cards

Discussion in 'Property Finance' started by sullivan, 31st Dec, 2016.

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  1. sullivan

    sullivan Member

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    I'm awaiting settlement on my first investment property and would appreciate if any finance wizards could point out any holes in my loan setup.

    I have two offset accounts.

    Offset 1 will receive rental income, and I will use for all property expenses.

    Offset 2 will receive my wages and I will use for all personal expenses.

    I will have two credits cards which I will use for all purchases as I wish to utilize the interest free period to maximize the total amount of $ sitting in my offsets.

    One credit card will be for property expenses and will be autopaid by Offset 1 on the same day each month.

    One credit card will be for personal expenses and will be autopaid by Offset 2 on the same day each month.

    Both cards have all fees waived as I will be exceeding the minimum annual spend ($1K on each)

    Will this work?
     
    Last edited: 31st Dec, 2016
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  2. Terry_w

    Terry_w Structuring Lawyer and Finance Broker - all states Business Member

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    Sounds ok to me.

    I assume you have no non-deductible debt?

    There is no need to have 2 offset accounts, one could do. But no harm if there are no extra costs. (suncorp?)

    No real need to have 2 credit cards either. But as it doesn't cost anything no harm in this either - wonder how long it will be before you use the wrong one!!!
     
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  3. sullivan

    sullivan Member

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    I don't have a PPOR / non deductible debt.

    I believe there are no extra costs for the two offsets (CBA).

    Is there no benefit to having personal expenses and property expenses seperate when claiming deductions come tax time as long as I have all receipts?

    My apologies for asking tax advice in a forum.
     
  4. Terry_w

    Terry_w Structuring Lawyer and Finance Broker - all states Business Member

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  5. sullivan

    sullivan Member

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    Yeah I've read tax tip #12 but only now grasp the fact that it's only a mixed purpose loam if paying interest (which I obviously don't plan to do)

    One offset and one credit card is much tidier. My mind is now at ease :)
     
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  6. D.T.

    D.T. Specialist Property Manager Business Member

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    Don't legally need to keep things separate.

    Just need to weigh up the pros and cons :
    - monthly or annual fee on offsets or cards?
    - complexity , might use wrong one
    - awesome for records keeping purposes since fewer transactions on the IP accounts
     
  7. dabbler

    dabbler Well-Known Member

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    I would do it the way you outlined, why ? cause I like to look at one account and know everything listed is related to one specific thing, easier for accountants too.

    The property expenses will all be on one statement or sheet or however you get that info.
     
  8. sullivan

    sullivan Member

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    Hmm... the credit cards have no fees as long as I make >$1000 purchases PA so that's not a worry.

    I guess if I got the cards mixed up it wouldn't be a big deal as my accountant would be cross referencing my deductions from receipts anyway...
     
  9. dabbler

    dabbler Well-Known Member

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    Can I ask who gives cards like that ? or is the offer tied to the loan package ?
     
  10. sullivan

    sullivan Member

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    CBA low fee credit card. 55 day interest free, annual fee waived with $1KPA minimum spend
     
  11. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

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    No need to specifically separate the accounts to avoid negative consequences- it can just potentially make things a little easier to keep track of/for accounting.

    Keep both offsets attached to non-deductible portion of debt, CBA will allow you to easily label which account is for what through their online banking which is convenient.
     
  12. mr_alex

    mr_alex Member

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    Sorry to hyjack the thread, just curious
    How much would you actually save on interest if you used a cc vs not: either you have a lump sum taken out of offset to pay off cc at end of period, or no credit card and take several smaller amounts out of offset for expenses during the month. Obviously both cases to have incomes going into offset. Is there a calculator out there for this?
     
  13. Terry_w

    Terry_w Structuring Lawyer and Finance Broker - all states Business Member

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    Imagine you spend $10k every month - on the 1st, and your loan interest rate is 5%.
    If you paid this with cash you would pay about $500 interest per year more than if you paid this with a credit card.
     
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  14. Terry_w

    Terry_w Structuring Lawyer and Finance Broker - all states Business Member

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    Actually the savings on the credit card method would be slightly more because of compounding.
     
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  15. tobe

    tobe Well-Known Member

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    Except if you spend more with the magic plastic than you would with cold hard cash and if you forget to repay the cc debt in full every month, which many of us do around Xmas time.
     
  16. Beano

    Beano Well-Known Member

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    Use 2 credit cards (ideally have 31 cards)
    Make sure they have different cutoff dates
    Select the card that has just rolled over
    You can then have max credit days
    Ps using the card one day before month cutoff verse one day after the cutoff ...another month of credit
     
  17. Beano

    Beano Well-Known Member

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    Use direct debit to pay the card
     
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  18. tobe

    tobe Well-Known Member

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    ‘Forget’ is a euphemism for overspending and not making the payment. No one (else) on this forum is that silly, but a large proportion of credit cards carry a balance.
     
  19. mr_alex

    mr_alex Member

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    So just to clarify with how the CC works, I am understanding that it is not the smartest thing to setup an auto payment at the end of the month for the card, because you are wasting the extra 25 days interest free period, so better to make manual payments towards the end of the 25days?

    But what if you spend $5k in month 1 statement, and then $5k on the first day of statement 2, then repay $5k - would it automatically go towards paying off statement 1 or 2, because you are paying it during statement 1s interest free period also during statement 2s month
     
  20. Terry_w

    Terry_w Structuring Lawyer and Finance Broker - all states Business Member

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    You usually have to pay the full amount owing as shown on the statement. Subsequent transactions will be on the next statement. Any payment will go to the first statement.