I have a savings account. I also have an investment loan with the same bank. My bank will allow me to offset the investment loan with whatever’s in the savings account. So if I have $25,000 in the savings account and the investment loan is $100,000, I would only be paying interest on $75,000.
However if I take $25,000 out of the savings account and buy a car (personal use) I would again be paying interest on $100,000. Will the ATO only allow me to claim a deduction on interest on the $75,000 from then on (that is from the time I first paid the $25,000 into the savings account to offset the investment loan)?
Cheers,
David
Hi David
Yes that is one of the beauties of offset accounts is that the primary loan does not become contaminated as the 2 accounts sit separate to each other. When you withdraw the $25,000 you can claim interest on $100K again.
To clarify this it will depend on the lender so assuming your lender offers a totally separate 100% transactional offset account you will be fine.
Interest will be charged and hence claimed as a deduction based on the net monthly balance.
Richard Taylor | Australia's leading private lender
Thanks Richard,
That’s very clear. They are separate accounts, one a savings account and one an investment loan. I’ve just changed the investment loan to a “Rocket” loan (Westpac) and whatever’s in the savings account offsets the rocket loan.
I did call the ATO and after speaking to 3 people (going higher up the advice chain) the ATO guy felt that whatever amount is in the offset account would mean the investment loan it is linked to would, for tax purposes, be forever diminished by that amount. But he wasn’t sure and he said to email them to get a ruling. But I think it’s clearly not the case.
Cheers,
David
David
He wouldnt have a clue. A concern isnt it.
Richard Taylor | Australia's leading private lender
Hi Richard,
It is a concern. The increasing complexity of the Australian taxation system means that on one side you have a huge bureaucracy full of… time serving bureaucrats of mediocre intelligence. On the other side an army of tax professionals and accountants and investment advisers all seeking ways to minimize or avoid tax. Or even simply to work out what tax is due. A gigantic waste of labour and talent.
I imagine it would be a huge boost to the economy to truly simplify the tax code.
Cheers,
David
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