Does paying off your PPOR too quickly trigger an ATO audit?

S

scientist

Just curious, I've heard some vague anecdotes from time to time that paying off one's PPOR mortgage too quickly triggers an ATO audit. Does anyone have any experience with this?

Basically my wife and I are in a position to put 150-200k into our PPOR offset account per year. The mortgage can be fully paid off some time late next year.

Should I be worried? What exactly gets the ATO's attention? Is it only when the mortgage is discharged that the bank notifies the ATO, or does the ATO get live data of changes of people's bank balances and ones which grow very quickly are red-flagged for investigation?

I run a small business and I pay my taxes so I will survive an audit, but I rather not have the hassle.
 
My experience is that ATO is only interested if your tax returns does not support quick mortgage pay off, but if you have income after tax to support early payment ATO is more relaxed.

Also no need to discarge the mortgage anyway. We have left. $200.- balance and reduced the mortgage payments to $2,- per month. This gives us easy access to credit if required.
 
scientist said:
Just curious, I've heard some vague anecdotes from time to time that paying off one's PPOR mortgage too quickly triggers an ATO audit. Does anyone have any experience with this?

Basically my wife and I are in a position to put 150-200k into our PPOR offset account per year. The mortgage can be fully paid off some time late next year.

Should I be worried? What exactly gets the ATO's attention? Is it only when the mortgage is discharged that the bank notifies the ATO, or does the ATO get live data of changes of people's bank balances and ones which grow very quickly are red-flagged for investigation?

I run a small business and I pay my taxes so I will survive an audit, but I rather not have the hassle.
Click to expand...

Wouldn't it be better to put the money into an offset linked to your PPOR mortgage so that when the debt = offset you don't have to pay anymore but you have the flexibility to use that money to buy an IP or turn your PPOR into an IP one day with some deductable debt against it.
 
The Courier Mail had an interesting article in it yesterday. The title was Tax man targets online earnings.(Queensland paper)


It seems e-bay,banks, Residential tenancy authority etc are handing over info.
This article seems to deal with dole cheaters...but I'm sure it goes further than that.
 
westminster said:
Wouldn't it be better to put the money into an offset linked to your PPOR mortgage so that when the debt = offset you don't have to pay anymore but you have the flexibility to use that money to buy an IP or turn your PPOR into an IP one day with some deductable debt against it.
Click to expand...

That would work well in this situation. ^^^^^
 
Why are you worried about grabbing ATO's attention. If you are lodging your tax returns truthfully, then you should have nothing to worry about.
 
D_One said:
Why are you worried about grabbing ATO's attention. If you are lodging your tax returns truthfully, then you should have nothing to worry about.
Click to expand...

xcept no business owner wants a desk or further audit taking time out from running the biz and pay staff.................


ta
rolf
 
westminster said:
Wouldn't it be better to put the money into an offset linked to your PPOR mortgage so that when the debt = offset you don't have to pay anymore but you have the flexibility to use that money to buy an IP or turn your PPOR into an IP one day with some deductable debt against it.
Click to expand...

Thats the plan - my question is actually whether the ATO gets wind of my offset account balance growing too quickly, sorry if unclear.

I'm curious about the underlying mechanisms behind it - do banks periodically send reports to the ATO of which accounts exceed a certain growth rate?
 
scientist said:
Thats the plan - my question is actually whether the ATO gets wind of my offset account balance growing too quickly, sorry if unclear.

I'm curious about the underlying mechanisms behind it - do banks periodically send reports to the ATO of which accounts exceed a certain growth rate?
Click to expand...

For 10k transactions they do, but not for growth rates. I think ato would only ask questions if it was unrealistic. Eg paying off 50k a year is different if you're earning 40k a year vs earning 140k.

My only tip, having had altercations with the ATO, is to document everything you do.
 
dtraeger said:
For 10k transactions they do, but not for growth rates. I think ato would only ask questions if it was unrealistic. Eg paying off 50k a year is different if you're earning 40k a year vs earning 140k.

My only tip, having had altercations with the ATO, is to document everything you do.
Click to expand...

Having worked in a branch many years ago, we were trained to flag any deposits or withdrawals of $10K or more that were cash (i.e. cash in/out of the bank, not online transactions). We also were trained to flag anything else that was deemed suspicious. I assume that your funds transfers are performed online so any flagging of transactions wouldn't be recorded manually by a teller but I'm pretty sure there would be some regular transaction listing that the bank sends off somewhere for where certain "rules/criteria" are met.
 
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