Bank stuffs up-But will the tax man make me wear the consequences?

[Keen]

In getting some of my lending restructured I advised the bank that they were to set up a Fixed I/O ($77k) to pay out the balance of my LOC to nil (Balance around $71k and floating up and down) but to stay open. I advised any residual funds were to be paid back into the Fixed I/O (ie $77k - $71k leaves $6k pay this to be Fixed I/O down to $71k itself).

Got the call today all had gone through but the bank paid the $6k into my LOC giving it a credit balance (not the Fixed I/O). When I ask for them to fix it they said they couldn't it was too late!

So in a nutshell I have drawn $6k from a Fixed I/O (rate 6.99% p.a.) and paid it into a LOC that is in credit.

I assume such debit interest is not tax deductible!

How do I rectify this?

I am in the next few weeks looking to purchase an additional IP - if I take $6k for the LOC will this then now be okay (Interest is charged at a lower 6.82%)?

Is there any reason I simply can't transfer the funds myself from the LOC to the Fixed I/O - or am I crossing the boundaries by paying into a product that is I/O.

Regards

Keen

 

[Rolf Latham]

Hiya

I would say that if you have paper wrk documenting what you wanted, then the tax man will leave you alone, especially if you buy another IP in the next few weeks. At 6.91 a week for missing interest I dont think you will be made an audit target.

Banks often make these errors. Its not to late if you want to put the $ in the acct yourself. BUT, remember if you do it, you will be reducuing principal and the contracted higher repayment each mnth will result in further erosion of the principal, and hence deductible interest.

Maybe the bank has done you a favour ...................

ta

rolf

 

[Les]

G'day Keen,

Don't spend too much time on this - pay all rates, mortgage interest, maintenance costs, etc. out of the LOC and it'll be "back to normal" before you know it.

And I've got to agree with Rolf - with the original loan still intact, you may well be thanking the Bank down the track for their stuff-up

Regards,