Anyone with CBA, how to structure with MISA account?

[MKP]

I used MISA for my PPOR for as long as I remember & it worked well.

Today, we set up another MISA to offset my IP variable loan.
100% rate offset for SVR + 1 yr guaranteed rate and discounted VR or partial

• offset on fixed rate loan
• min withdrawal:$500
• Min balance $1000
• Access: netbank, ATM, EFTPOS, phone, branch

It can not be used as transaction account for repayment of loan.
MKP

I'm going through CBA. I want to get a offset account, but was told the MISA account isn't a transactional account.

Was also told if i put extra repayment into the home loan, it acts as a offset account.

Wanted to know how do you guys structure this?

 

[Rolf Latham]

There is a minimum $1000 balance in the MISA account for it to actively offset against your home loan. So as long as you meet this then the $1 you put it in will offset.

Say you had $2000 in there and you want to withdraw $1 - do a transfer out of $500 and then transfer back in $499.

Regards,

Jason

shhhhhhh

stop the logic : )

ta
rolf

 

[D_One]

Nice - I like it. Always more than one way to skin a cat.

Is there rules/regulations around what knowledge brokers/bankers impart on poor innocent Investors? It would appear that poor advice such as the OP's could lead to all sorts of headaches including having to unpick ded/nonded expense - or in the worst case assume all is non-ded.

I think advices by personal lenders should be regulated. I have almost be caught out twice if not from advices from good people on SS. I was told the same thing by my personal lender about using the redraw facility instead of offset, even when I brought it to the attention of my personal lender, she wouldn't accept that that redraw can contaminate the loan.

 

[knightm]

I think advices by personal lenders should be regulated. I have almost be caught out twice if not from advices from good people on SS. I was told the same thing by my personal lender about using the redraw facility instead of offset, even when I brought it to the attention of my personal lender, she wouldn't accept that that redraw can contaminate the loan.

I just had a conversation with my local branch manager and explained this to him - the penny finally dropped after he had been pushing me towards redraw before.

 

[Rolf Latham]

I just had a conversation with my local branch manager and explained this to him - the penny finally dropped after he had been pushing me towards redraw before.

Education 1

Assumption and ignorance zero

well done

ta

rolf

 

[JohnA]

An investor should not take loan structuring advice from a broker ( worse a banker) without getting some independent specific advice from a second party............and that DOESNT mean shopping your loan with 3 different brokers to get their opinion.

ta
rolf

Hi Rolf

From a new investors point of view - if an investor should not take structuring advice from a broker without getting independent advice from a second party - who is this second party that we new investors should consult?

 

[Rolf Latham]

Hi Rolf

From a new investors point of view - if an investor should not take structuring advice from a broker without getting independent advice from a second party - who is this second party that we new investors should consult?

An accountant, a financial planner, someone that you know has a bunch of runs on the board with property.

ta
rolf

 

[JohnA]

An accountant, a financial planner, someone that you know has a bunch of runs on the board with property.

ta
rolf

That is where I get confused. An accountant is not supposed to give financial advice - directs you to financial planner. From what I have read financial planners are not great with IPs (specialise in shares, managed funds etc) - and if you don't know someone with runs on the board?
So you read books and this website - and go around in circles ...

 

[Rolf Latham]

That is where I get confused. An accountant is not supposed to give financial advice - directs you to financial planner. From what I have read financial planners are not great with IPs (specialise in shares, managed funds etc) - and if you don't know someone with runs on the board?
So you read books and this website - and go around in circles ...

Clearly its time to step off the Merry Go round and find an accountant that is willing to provide a simple structuring OK.

This is NOT financial advice. It is primarily taxation advice

If you need a recommendation, just ask here, we all work with Accountants and planners that have the courage to stand for their convictions.

And no, ur average 4 week trained tax agent will usually NOT do the job, its not about ticking boxes, but about having foresight

ta
rolf

 

[Rolf Latham]

I think advices by personal lenders should be regulated.

They are

Its called National Consumer Credit Protection Legislation ( NCCP for short)

ta
rolf

 

[Aaron_C]

That is where I get confused. An accountant is not supposed to give financial advice - directs you to financial planner. From what I have read financial planners are not great with IPs (specialise in shares, managed funds etc) - and if you don't know someone with runs on the board?
So you read books and this website - and go around in circles ...

Meh...most of the experts (financial/tax/accounting/legal) are all just involved in a whole merry-go-round of ***-covering. This is because:
a) they have no idea of what they are talking about outside or merely incidental to their expertise;
b) they have no idea about what they are talking about within their expertise; or
c) They are so scared of being sued for giving wrong advice.

You really should surround yourself with experts who know a bit about everything...after all, life and investing is not so conveniently pigeon-holed into certain areas as the law may have you believe.

 

[hb40]

Misa

I have a big problem with the CBA offset account, it should really act as a line of credit account. Which is doesn't because it's not a transactional account.

For example, if I put all my pay and rental income into my MISA account automatically, I can not pay my CBA interest on the loan from the MISA account automatically! I have to transfer the funds from my MISA account on a monthly basis to my savings account for the loan repayments to be deducted.

It's really unbelievable that the CBA get away with this. I've complained a number of times for the last few years about this poor offset account service and the answer I was given: "Oh our software is set up this way, if you want a real offset you should setup a line of credit account ... but then you have to pay a higher interest rate on any funds you have in the line of credit account"... What the!

It seriously bugs me because I recon I lose around $2k a year from having to manually keep my saving account topped up ready for the monthly loan repayments and then balance it back down by transferring remaining funds to my MISA to maximise my offsetting of loan. It's just plain silly and I am sure CBA know they're making loads of money from this fact and they're simply unwilling to fix it.

I had to get that one off my chest cause I've been chasing my CBA bank managers for yrs and their solution of a higher-interest-rate line of credit simply sux! I know other banks offer a real transactional offset account...

Feel free to complain to CBA too and they may do something one day

 

[o0o]

I have a big problem with the CBA offset account, it should really act as a line of credit account. Which is doesn't because it's not a transactional account.

For example, if I put all my pay and rental income into my MISA account automatically, I can not pay my CBA interest on the loan from the MISA account automatically! I have to transfer the funds from my MISA account on a monthly basis to my savings account for the loan repayments to be deducted.

Solution = Have all your rent money deposited into your Viridian LOC and have the loan repayments taken from the same Viridian LOC. Have entire salary deposited into the MISA acc and transfer estimated living costs for the month from MISA to Streamline. Any share dividends or managed fund distributions get deposited into Viridian LOC. Can anyone see any flaws with this set up?

 

[Peter_Tersteeg]

No problem transacting everything in and out of the LOC, but don't try claim the interest on this account as you'd be contaminating the use of the funds. Have it set up as a loan against your PPOR, not an IP.

There's little point in having a LOC against an IP, an interest only loan will do the same job and is cheaper.

 

[Terry_w]

Solution = Have all your rent money deposited into your Viridian LOC and have the loan repayments taken from the same Viridian LOC. Have entire salary deposited into the MISA acc and transfer estimated living costs for the month from MISA to Streamline. Any share dividends or managed fund distributions get deposited into Viridian LOC. Can anyone see any flaws with this set up?

Yes, tax issues as Peter suggests.

 

[o0o]

No problem transacting everything in and out of the LOC, but don't try claim the interest on this account as you'd be contaminating the use of the funds. Have it set up as a loan against your PPOR, not an IP.

There's little point in having a LOC against an IP, an interest only loan will do the same job and is cheaper.

Would my example be ok if the loan was for an IP and not PPOR?
Could i still claim the interest on the Viridian LOC as a tax deduction.
Reason for the LOC instead of an interest only loan is so I can pay outgoings with it (council rates, maintenance etc).

 

[Peter_Tersteeg]

Would my example be ok if the loan was for an IP and not PPOR?
Could i still claim the interest on the Viridian LOC as a tax deduction.
Reason for the LOC instead of an interest only loan is so I can pay outgoings with it (council rates, maintenance etc).

No, you can't claim it as a tax deduction because you're using the LOC to pay interest. This is essentially seen as capitalising interest which the ATO usually won't allow.

You can set up a deductable LOC for the sole purpose of paying rates, maintenance and other costs, but not interest. Interest payments are tax deductable, but the interest on those interest payments is not.

 

[Terry_w]

No, you can't claim it as a tax deduction because you're using the LOC to pay interest. This is essentially seen as capitalising interest which the ATO usually won't allow.

You can set up a deductable LOC for the sole purpose of paying rates, maintenance and other costs, but not interest. Interest payments are tax deductable, but the interest on those interest payments is not.

Interest on interest is generally deductible if the underlying interest is deductible according to the ATO in TD 2008/27.

But where the borrowings are a scheme set up to increase deductions then the ATO can apply part IVA to deny the extra deductions, TD 2012/1

 

[o0o]

Thanks Peter and Terry, so it looks like my example would be ok with the ATO if they deemed it wasn't a scheme set up with the aim to increase deductions?
How would I verify this or is it a matter of hoping I don't get audited but if I did then the ATO would need to prove my set up was done with the purpose of increasing deductions?

Interest on interest is generally deductible if the underlying interest is deductible according to the ATO in TD 2008/27.

But where the borrowings are a scheme set up to increase deductions then the ATO can apply part IVA to deny the extra deductions, TD 2012/1

 

[Terry_w]

Thanks Peter and Terry, so it looks like my example would be ok with the ATO if they deemed it wasn't a scheme set up with the aim to increase deductions?
How would I verify this or is it a matter of hoping I don't get audited but if I did then the ATO would need to prove my set up was done with the purpose of increasing deductions?

I don't know it would be ok or not. You need to seek tax advise about your specific set up.