Reply: 4.1.1.3.1.1.1.1.1
From: Anonymous
Les,
Good pick up. This was a typo:
"A lot of people
>on this forum have said that
>offset accounts are a great
>way to "park" extra funds and
>so reduce the interest payable
>on an IP loan,
I meant to type "...reduce the interest payable on an IO loan"
Hey, the "O" and "P" are right next to one another.
So that's what I meant....that while you're living in the property, you can effectively reduce your interest rate but preserve the tax deductible loan (well, the portion of the loan that will become tax deductible one you move out and convert the property into an IP)
This seems like the best of both worlds.
With regards to netiquette, I'd say that not belittling or bullying others when they ask a question or try to argue a point is more important. If that's the kind of behaviour condoned on this forum, community my ass!
Anon (and proud of it!)
On 7/2/02 8:39:00 PM, Les . wrote:
>
>
>G'day Anon,
>
>You said "This accountant told
>me that the above strategy is
>absolutely NOT legitimate. He
>told me that since money in
>the offset account IS
>effectively reducing the
>balance upon which the
>interest is calculated, then
>that money is effectively
>diluting the tax deductible
>proportion of the loan. Not
>only that, but since the bank
>treats the money in the offset
>account in this way, then
>effectively you CANNOT
>separate money in the offset
>account from the home loan in
>the eyes of the ATO."
>
>Les>> I think most
>respondees have answered this
>as though it were an Offset
>against an IP. An Offset
>against a PPOR certainly has
>different implications. e.g.
>your quote "that money is
>effectively diluting the tax
>deductible proportion of the
>loan" does not apply to a
>PPOR. You are effectively
>diminishing the Interest paid
>to the Bank, but I would BET
>you've paid your share of Tax
>in putting AFTER TAX dollars
>into the Offset in the first
>place. To MY mind, that makes
>it YOUR money, and yours to do
>with as you wish. You've
>already paid FULL Tax on it.
>
>You also said "A lot of people
>on this forum have said that
>offset accounts are a great
>way to "park" extra funds and
>so reduce the interest payable
>on an IP loan, but allowing
>you the flexibility to
>withdraw the money later on
>without effectively reducing
>the tax deductible portion of
>your loan. It sounds like
>having your cake and eating it
>too which, as this accountant
>today pointed out to me, the
>ATO is not dumb enough to let
>you get away with."
>
>Anon, I would say that in
>having it "parked" in the
>Offset account against an IP,
>I am REDUCING my Tax
>Deductions (because of the
>temporary Offset to the
>mortgage), AND I've paid FULL
>Tax on the amount that is
>REDUCING the mortgage - so I
>don't see the ATO has missed
>out anywhere, can you? And
>when I choose to take my own
>funds out of the Offset to
>apply them wherever, the
>mortgage has not changed (has
>it?) and I again claim the
>original amount, because I'm
>no longer "parking" surplus
>cash in the Offset.
>Effectively, I had been SAVING
>the ATO money - but now, I
>want to use the cash elsewhere
>- isn't this my right?
>
>As far as "having my cake, and
>eating it too," - it doesn't
>sound that way to me (from the
>above). A strange thing for
>an Accountant to say,
>IMHO..... but maybe it was
>because of the specific
>"Offset against a PPRO" that
>made the difference.
>
>I wonder, though, Anon - what
>would the ATO have you do
>instead? Park your money in a
>Savings account so that you
>can pay more Tax on the
>Interest from the Savings?
>If so, who then is "wanting
>their cake and eating it"?
>
>Try for a second opinion IMHO,
>
> Regards,
>
>Les
>
>
>- "Eschew Obfuscation" - ;^)
