Anyone with CBA, how to structure with MISA account?
- Thread starter TN_
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Aaron makes a very good point and it's extremely important to distinguish redraw from offset.
It's true the MISA isn't fully transactional - but I personally use one and it does the trick for me. You can still receive funds into the MISA and transfer them out (minimum transaction is $500 though - which you can get around with a little creativity).
What are you proposing to do with the MISA? Is the loan it's offsetting fixed or variable?
Cheers
Jamie
It's true the MISA isn't fully transactional - but I personally use one and it does the trick for me. You can still receive funds into the MISA and transfer them out (minimum transaction is $500 though - which you can get around with a little creativity).
What are you proposing to do with the MISA? Is the loan it's offsetting fixed or variable?
Cheers
Jamie
Being my first IP (and a first time buyer), I plan to pay interest only and whatever extra cash flow I intend to put into the MISA account. I want to purchase a second IP before mid next year while the market is stagnet.
I intend to go variable rates as there talks of rates dropping.
Interestingly enough it was the CBA mobile homeloan agent that told me about putting my cash into my home loan. It arouse suspicion and I thought I'd cross reference his words to people on Somersoft.
Thanks guys!
I intend to go variable rates as there talks of rates dropping.
Interestingly enough it was the CBA mobile homeloan agent that told me about putting my cash into my home loan. It arouse suspicion and I thought I'd cross reference his words to people on Somersoft.
Thanks guys!
The MISA is CBAs answer to the offset account, but as you've discovered it's not a real offset account.
Putting funds into the homeloan directly and redrawing it later is not a substitution for an offset account for tax purposes. The interest it'll save you is the same, but the way the ATO treats it is definitely not.
With the CBA, the best thing you can do is set up a savings account and have your income and expenses transact from there. Set up the MISA account and transfer any surplus funds there.
It's not ideal, but it's the best they can do for the time being.
Putting funds into the homeloan directly and redrawing it later is not a substitution for an offset account for tax purposes. The interest it'll save you is the same, but the way the ATO treats it is definitely not.
With the CBA, the best thing you can do is set up a savings account and have your income and expenses transact from there. Set up the MISA account and transfer any surplus funds there.
It's not ideal, but it's the best they can do for the time being.
I've use a MISA just recently and it works well. Other than some minor constraints it is a very flexible arrangement and there aren't any significant negative issues with it.
Aparently all CBA Line of Credit secured loan accounts (read mortgages) have a MISA account attached. This is hidden by default and only enabled if you ask for it specifically. Also, if for some reason you clear your MISA account balance to $0, then an automatic process will sweep through and hide it again.
I have a good relationship with CBA and a few mates actually work there so this info is straight from the horses mouth.
Technically speaking, if you have a LOC then there is no need to have an offset. You just drop any surplus funds into the LOC account and pay less interest. There is no difference whatsoever with just using a LOC versus a normal mortgage account and an offset.
Hope this helps
regards
Michal
Aparently all CBA Line of Credit secured loan accounts (read mortgages) have a MISA account attached. This is hidden by default and only enabled if you ask for it specifically. Also, if for some reason you clear your MISA account balance to $0, then an automatic process will sweep through and hide it again.
I have a good relationship with CBA and a few mates actually work there so this info is straight from the horses mouth.
Technically speaking, if you have a LOC then there is no need to have an offset. You just drop any surplus funds into the LOC account and pay less interest. There is no difference whatsoever with just using a LOC versus a normal mortgage account and an offset.
Hope this helps
regards
Michal
The credit advice provided by the CBA person is "UNSUITABLE" as defined by the NCCP definition on the basis of the information provided by the OP.
Isnt even a tax advice thing per se..........
ta
rolf
let's say you have a loan of 300k and get a 50k windfall and in a couple of years you decide to buy a car for 50k....
redraw:
you pay 50k off the loan. so you pay interest on 250k for a couple of years. when you 'redraw' the 50k in a couple of years time the ATO will treat that as a new loan and look at the purpose of the loan. car = no tax deductibility on the 50k. if you used the 50k for investing = tax deductible. you now have 250k in deductible debt.
offset:
you stick the 50k in a savings account called an offset account. the bank agrees to pay you no interest on the savings account but reduce the interest on your loan by the same amount. you didn't receive an income on the 50k so don't pay income tax on that. you pay interest on 250k for a couple of years. you withdraw the 50k from the offset account to buy your new car. you now have 300k of deductible debt.
it get's even worse if you are constantly paying down a loan and redrawing. you can end up with no deductible debt quite quickly and a lot of work figuring out what your deducible debt figure is.
your accountant is likely to punch you in the face for being so stupid. you could always go to a cheap accountant who will get you a big fat refund. at this point you should convert to any relgion and pray like hell that you don't get audited.
Exactly
and that's how you get around the minimum $500 debacle.As someone else mentioned though - don't remove all of the funds because the MISA will go MIA.
Cheers
Jamie
Is it different from "Transfer $500 from MISA to Saving, and transfer $499 from Saving to MISA"?
There is not restrictions on the amount being transferred into MISA, right? Even I transfer $1 into MISA, that $1 will offset interest, right?
Thanks,
Troy
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
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
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.
Well there are several different types of advice that are regulated:
Financial Advice (Section 911A of the Corporations Act)
Legal Advice (Regulated by the Legal Profession Acts)
Credit Advice (Regulated by NCCP)
Tax Advice (Tax Practitioners Board)
So to give each type of advice you need to have the appropriate qualifications. For financial advice you need an Australian Financial Services Licence (AFSL), legal advice you need a practising certificate, credit advice you need a diploma in financial services, tax advice you need the certificate from the Board.
Of course in conversations with any broker, financial planner, accountant, lawyer etc the topics will invariably cover something which they are technically not 'licensed' for, that is unavoidable. I doubt you could pin a professional for that. However, if they are charging for advice which they are not supposed to give (i.e. a lawyer giving financial advice in a way that is not merely incidental) then you can probably take action against them for being unlicensed. However, their PI insurance probably wouldn't cover that angle anyway so if they go bankrupt you can't get anything.
Please dont take this the wrong way
Dont confuse innocent with ignorant.
In the trade its NOT possible to not provide general advice on a whole range of a manner of things.
Because we are rarely licensed specifically in this area I always suggest folks get specific advice
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
We use a Commonwealth MISA account as well and it works well for us. Using a redraw (paying off the loan account) does cause issues from a tax point of view.
The way we use our MISA is to still have a savings account and anything that cannot be done via the MISA we just have an auto transfer set up to the Savings a day before it's due.
It's not the most convenient method but it's not exactly a pain in the rear either. It doesn't take long to get used to it.
The way we use our MISA is to still have a savings account and anything that cannot be done via the MISA we just have an auto transfer set up to the Savings a day before it's due.
It's not the most convenient method but it's not exactly a pain in the rear either. It doesn't take long to get used to it.
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