Refinance but with same lender

Discussion in 'Accounting & Tax' started by Mlee17, 23rd Sep, 2020.

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  1. Mlee17

    Mlee17 Well-Known Member

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    Hi all

    I was having a discussion with a mate and apparently he was advised that a "refinance" to unmix mixed loan does not have to be with a different lender but as long as the loan is split with the same lender, it's considered a refinance by the ato?

    Really? Sounds bit weird.
     
    Mlee17, 23rd Sep, 2020
    #1
  2. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Perhaps.
     
    Paul@PAS, 23rd Sep, 2020
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  3. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    not a tax guy...............

    But I cant see why an internal refi isnt the same for tax purposes as an external refi. Shuffling splits without new loans being drawn to pay out the mess may not be ok .

    Thats the problem with pub talk................one really needs specific advice

    ta
    rolf
     
    Rolf Latham, 24th Sep, 2020
    #3
  4. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    For the purposes of a internal refinance (ie same lender) the ATO adopt the view that the mortgage must change for residual borrowing expenses to be claimed at the point of refinance. You cant go from a variable loan to fixed with different account numbers as no DISCHARGE of the mortgage occurs. It is maintained using different account details.

    For the purposes of the refinance for a loan split to correct a blended loan there is no requirement to use a external lender. A internal refinance MAY be OK. They key issue is determining what the $$$ to split are. You cant just look back and say hey I used $100K three years ago for a reno and therefore I need to split out $100K today. Instead a calc of the % that relates to the $100K needs to be made and then that % of the present loan balance is likely the value to split out. LOCs, cards and other revolving forms of credit can be very complicated and difficult to apportion.
     
    Paul@PAS, 24th Sep, 2020
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  5. Terry_w

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

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    A refinance is using one loan to pay out another. Our clients do it all the time without changing lenders or even loans. Redrawing from one loan and paying into another is a refinance.

    Get tax advice.
     
    Terry_w, 24th Sep, 2020
    #5