Transfer of funds to save interest

Discussion in 'Accounting & Tax' started by Investor_84, 2nd Jul, 2018.

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  1. Investor_84

    Investor_84 Well-Known Member

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    I have two loans two seperate banks one on 4.79% IO investment variable and the other which is currently on 4.65% investment IO but will increase in a week to 4.85%.

    I currently have offset the full loan where I’m paying 4.79% interest so technically not paying any interest. The 4.65% loan currently is 50% offset but before it increases to 4.85% to save interest I want to transfer funds from the 4.79% loan to this 4.85% to fully offset it and pay interest on the 4.79% loan.

    Is this completely fine from a tax perspective as they are both loans for investment properties.
     
    Investor_84, 2nd Jul, 2018
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  2. Terry_w

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

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    Any borrowed money in the offsets?
    Are you the sole owner of both properties?
     
    Terry_w, 2nd Jul, 2018
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  3. Investor_84

    Investor_84 Well-Known Member

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    No borrowed money in the offsets. Just savings.

    Correct sole owner of both properties.
     
    Investor_84, 2nd Jul, 2018
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  4. Terry_w

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

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    the offset account is just a savings account. You can transfer money around with no direct tax consequences.
     
    Terry_w, 2nd Jul, 2018
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  5. Investor_84

    Investor_84 Well-Known Member

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    Yea but if I got two offsets for two loans but I transfer funds from one offset to another this will mean I’m paying less interest for one loan where the interest % is higher and More on the other property with is less interest % but higher loan balance
     
    Investor_84, 2nd Jul, 2018
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  6. Terry_w

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

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    Offsets work by reducing the interest payable on the loan the offset is connected to.
     
    Terry_w, 2nd Jul, 2018
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  7. Zaid Elfar

    Zaid Elfar New Member

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    Following on to the question above, what i I am transferring funds between offset accounts on a monthly bases to reduce interest repayments. One banks takes its repayments first week of every month and the other bank takes its repayments at the last week of every month. So will i be able to transfer my total saving back and forth between the two bank accounts prior to the interest repayments?

    Thanks
     
    Zaid Elfar, 11th Jul, 2018
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  8. Scott No Mates

    Scott No Mates Well-Known Member

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    @Zaid Elfar - Interest is calculated daily on each of the balances outstanding.

    Leave the funds in the account with the higher interest rate.
     
    Scott No Mates, 11th Jul, 2018
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  9. Zaid Elfar

    Zaid Elfar New Member

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    Thanks Scott
     
    Zaid Elfar, 11th Jul, 2018
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  10. Terry_w

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

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    You will probably lose out a days interest by transferring funds too as they would take the daily balance into account to calc daily interest. For most people this is not an issue, but if you have large sums $60 or so a day on $500k
     
    Terry_w, 11th Jul, 2018
    #10