Tax Tip 1: Parking borrowed money in an offset account

@Terry_w How do you fully reset a loan to $0 when the bank says they will close it upon hitting $0?

CBA
Once the loan has been repaid down to $0, loan is closed. You need to reapply for some money to be reversed, so it can be opened again. I've had the loan down to $1 and I was able to keep it open..

ANZ
Similar story to CBA, however I've been told once the loan owing is down to $5 they close it.

If you bank with either of these, what do you do? Just leave the $1 or $5 in there ?

 

neK in such situations you need to have a mixed loan. leave some money in there so it is not paid off.
$100 of out a $100,000 loan is just 0.1% so not much to worry about.

 

Could you phone the bank and ask them if they will keep it open for a day or 2? I know I have called AMP and asked them to do thing that are not automatic. If you let them know first, sometimes they say yes.

 

I've been given various misinformation by CBA depending on who answers the phone.
The process I am lead to believe is automatic and there is not much the phone operators can do about it when the process is automated.

STG i know allow you to pay a loan down to $0 and it won't be closed. However the downside is that the funds are not available until next the monthly cycle.

CBA I've put down to $0 and the loan was closed. After it was reopened, I've paid it down to the last $1 and i didn't dare go beyond that.

These tests have been done in the last 2 months.

 

Good point - but see nek's comments.

 

Hi Terry,

It has been great through reading your tax tip post. Just need to get some clarification for the below scenario ( Parked personal fund in offset account).

Recently has a settle a home loan with an offset account. Have some extra saving fund deposited in the offset account and frequent deposit put toward the offset account. This fund will be use to purchase another investment property. So will the whole interest charged on this loan will be tax deductible after we use all the fund in the offset account to purchase the second investment property?. Thank you.

 

No direct effect on deductibility of interest - indirectly you will be saving while the cash is in there. Once you withdraw funds the whole interest on the full loan should be deductible - provided it relates to the purchase of income producing property.
.

 

Just an update on my investment loan @Terry_w. The original investment loan was fully drawn down into an offset account where funds were to be disbursed for investment purposes. However, ING has deposited non-borrowed funds into the offset account and the funds in the offset account are now mixed. I was already reluctant to invest from the offset account.

In my case I am able to transfer funds back into the loan account and invest directly from there. It is a lot more straightforward to be able to invest directly from the loan account.

When people get a new loan for investment purposes, I think an important criteria should be that they can invest directly from the loan account and not have to pass through any kind of intermediary account.

 

Oh dear!

 

Into the offset account, not the loan account. Phew! I edited my post to make that clear.

 

So the borrowed money is not mixed. The whole of the loan that related to the deposit in the offset is tainted. You could pay off the loan - put all the money back into the loan and then reborrow again. that would clean it up

 

The original funds have all gone back into the loan account and all disbursements are going directly from the loan account to my builder, not through any other account.

 

@Terry_w, ANZ charged me interest on my Equity loan (25% secured against PPOR for investment purposes) wrongly. Called them and they credited back the interest, not once but twice into my loan. Now I have more $ than what the loan amount should be. What does this mean? Should I ask them to take back one lot?
Thanks

 

ha ha. I am sure they can reverse the transaction if it was a mistake. Or just keep it...

 

it has been there a few weeks now so they might have not realised it. I'll keep if this won't affect my loan and interest deductability $90 is dinner for two, means nothing to them anyway

 

It shouldn't as it is just a reimbursement. Don't forget to deduct it from the total interest claimed.

 

You're a treasure to this forum Terry. Thank you

 

can the fund be parked in the lawyers trust account for off the plan property, would that be too long? and the interest will be still deductible? Thanks.

 

what were the funds they were depositing into the account? the interest from the loan you were offsetting?