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Pay has gone to housing loan (now investment loan) instead of offset account

Discussion in 'Accounting & Tax' started by wylie, 21st May, 2016.

  1. wylie

    wylie Moderator Staff Member

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    My son has asked me for an answer to a problem that is common, but each situation may be slightly different so here is his story.

    He is in a new job, paid monthly. His first pay didn't come through to his bank, so he checked and found he gave the details for his housing loan to the bank instead of his offset account details. So his first month's pay has gone into his housing loan.

    The house in question is now an IP so effectively, he will be claiming the interest on his tax for this year, so it is really an investment loan.

    Can he ask the bank to reverse this credit to his account and put it into his set off account without creating a problem for his tax?

    If he cannot, he will leave it in the loan rather than create a tax or accounting problem.
     
  2. Marg4000

    Marg4000 Well-Known Member

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    I hope his first step was to change the account details for his pay to go into the correct account !!
    Marg
     
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  3. wylie

    wylie Moderator Staff Member

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    He just discovered his error this morning. He will change it first up Monday so his next pay goes to the right place. He is able to manage if it stays in the housing loan but would prefer having access to it as he is going overseas in three weeks (but we will see he has enough to get through to the next pay and for travelling if that is necessary).
     
  4. York

    York Finance Broker Business Member

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    I would speak to the bank first thing. Explain the situation and politely request to transfer to offset. They may do it or they may ask for a redraw fee if applicable. Either way, assuming the funds were only there for a short time, it shouldn't be an issue regarding tax.
     
  5. Beelzebub

    Beelzebub Well-Known Member

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    Are you sure there would be no issues? Wouldn't withdrawing the money create a mix use loan and strip the deductibility of whatever the amount put on the loan was?
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Transferring it is not advisable as this will create a mixed purpose loan. Best to either leave it and put it down to a learning experience or try to get the bank to reverse it so that it never happened. For this to work it has to be removed from the statement totally. Since the employer made the payment they would probably have to advise the bank that it has gone to the wrong account.
     
  7. wylie

    wylie Moderator Staff Member

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    Thanks all. I'm thinking best action is to leave it in the loan. No risk that way.
     
  8. Beelzebub

    Beelzebub Well-Known Member

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    Terry if you accidentally paid extra this month could you just skip next months payment? Essentially wouldn't it just be paying the interest for May and June at the same time? Could this avoid a mix use loan?

    If that were the case, could he access a short term interest free loan from the bank of mum and dad and pay that back with what would have been June's mortgage payment?

    It has me wondering as I'm about $500 ahead on one of my IO loans due to accidentally transferring small sums of cash onto it every now and then. As I'm not the sharpest tool in the shed I know It's only a matter of time before I accidentally transfer a large sum of money to the wrong account. Surely, when I do, there's a work around to get it back in a tax effective way?
     
  9. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    If you skip the next month's repayment you would be in default of the loan. From a tax point of view it would probably be ok, but from a contract point of view you would be in breach. So you had better speak to your bank about this.
     
  10. Joynz

    Joynz Well-Known Member

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    Easy to do with online banking.

    I ended up renaming my accounts to avoid this, so they are now called. [address] mortgage and [address] offset when I see them online.
     
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  11. Beelzebub

    Beelzebub Well-Known Member

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    Really? Isn't it just the same as making early payments? If my loan repayments are $1k a month and I make the payment for June plus accidentally make another $1k Payment for June aren't I just ahead? I've taken care of June and July and don't have to worry again until August?

    @Joynz I did that, still make the mistake. I'm just really not that intelligent
     
  12. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes. I though this was the case, about 10 years ago with ANZ i kept getting letters every month.

    But you may actually ahead, but are still missing payments. So check with your lender first.
     
  13. Marg4000

    Marg4000 Well-Known Member

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    I always thought this. When paying extra on our house loan I always looked at it as being xxx months ahead. That was back in the days when we had a repayment book with vouchers for each month!!

    But not according to the bank. Extra payments are ok, but do not remove the obligation to make the next month's payment.

    Some banks now let you apply for a repayment holiday if you are ahead but it must be approved first.
    Marg
     
  14. Beelzebub

    Beelzebub Well-Known Member

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    Wow, this is good to know. I have done this with my bank and never heard from them.
     
  15. dabbler

    dabbler Well-Known Member

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    I would ask it to be reversed if it will cause a shortage of funds. Do not re draw it as has been said.

    I also like to keep all personal income in a completely different account to anyone I have a loan with, it is easier to watch that income is paid correctly & easy to transfer out to wherever needed.
     
  16. dabbler

    dabbler Well-Known Member

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    I am sure most of us would have made the mistake and outsmarted ourselves, trying to save on interest or whatever, and click the wrong acc and sent money off, at one stage I had family accounts and quite a few of us had the same first initials and multiple accounts.....mistakes just waiting to happen :)