Tax Tip 112: Segregating Cash in different accounts - No Need

Discussion in 'Accounting & Tax' started by Terry_w, 25th Apr, 2016.

Join Australia's most dynamic and respected property investment community
  1. Terry_w

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

    9th Jun, 2006
    Australia wide
    Segregating Cash in different accounts - No Need

    Some people seem to think rental income needs to be deposited into a separate account to the savings and wages. They worry that mixing may occur.

    There is no tax reason to do this segregating of money. Mixing money may occur but it won’t matter unless the money is borrowed. In fact, you would be better off if the rental income was deposited into the offset account attached to your main residence loan as this is non-deductible. You will save more non-deductible interest this way.

    BUT - There would be issues if you have borrowed money and parked it on an offset account – no deposits should be made into this account.

    There also may be issues if it is not your money. E.g. you may own a property in your own name and your spouse puts their wages into your offset – so you can save interest. This may be good for the interest savings, but this reduces potential strategies available such as lending to each other.

    But there are other non-tax reasons why you may want to segregate money - saving for different things for example. If you want to do this consider setting up more than 1 offset account attached to the main residence loan.