Offset Accounts vs Savings Accounts vs....

[Aaron_C]

Um that's wrong. She thinks you are talking about redraw.

 

[Rolf Latham]

Hi Aroon,
Early in April, I asked the tax office about having an offset account on an IP loan. The advice given to me was: that I can not jut get mony in and out of the offset account without affecting mnay tax deductibility. Example:
1.If balance of my IP loan is 100K and balance of my offset accnt is 0, then the full interest for $100 K is deductible.
2. Using the IP loan balance above, and balance of offset accnt is $10K, then the interets deduction is for $90K.
3. But If I pulled out the $10K from the offset accnt, and the IP loan balance goes back to $100K, I have to apportion the interest that I use for IP and for private use (which is interets from the $10K)

I argued long and hard with her, but she said: THAT WAS IT! I thought she may have misunderstood the meaning of off-set account; but she was very clear she understood it perfectly.

Can anyone let me know what the current rule is for offset account on IP loan?

Thanks

Get in writing, or at least speak to your accountant.

Phone advice DYI kidney transplant is not recommended


ta
rolf

 

[Terry_w]

Hi Aroon,
Early in April, I asked the tax office about having an offset account on an IP loan. The advice given to me was: that I can not jut get mony in and out of the offset account without affecting mnay tax deductibility. Example:
1.If balance of my IP loan is 100K and balance of my offset accnt is 0, then the full interest for $100 K is deductible.
2. Using the IP loan balance above, and balance of offset accnt is $10K, then the interets deduction is for $90K.
3. But If I pulled out the $10K from the offset accnt, and the IP loan balance goes back to $100K, I have to apportion the interest that I use for IP and for private use (which is interets from the $10K)

I argued long and hard with her, but she said: THAT WAS IT! I thought she may have misunderstood the meaning of off-set account; but she was very clear she understood it perfectly.

Can anyone let me know what the current rule is for offset account on IP loan?

Thanks

Don't rely on a phone call with the ato - what if the person was wrong?

An offset account is a savings account and should have no bearing on deductiblity of interest on a separate loan account.

Were you using funds drawn down under a loan and parked in the offset?

 

[Peter_Tersteeg]

I've been on Somersoft for over a decade and have yet to hear of anyone saying, "The ATO audited me and ruled against me for using an offset account". I've never heard advice to the contrary from an accountant or tax lawyer either.

I have had bad advice from the ATO help desk.

 

[Fourex]

What is your plan if your mother marries?

What happens if your mothers husband has kids (does the inheritance get split)?

What if your mother falls ill and requires ongoing expensive medical treatment?

Just allowing for all scenarios.

Fourex.

 

[Terry_w]

From my notes I have the following which supports offset accounts don't affect deductibility

Private Ruling Authorisation Number 85315
Money taken from an offset account on IP and used for private purposes does not affect deductibility of interest on the IP

TR 93/6
http://law.ato.gov.au/atolaw/view.htm?locid='TXR/TR936/NAT/ATO

I am sitting near a beach in Thailand so haven't looked these up to confirm.

 

[MKP]

From my notes I have the following which supports offset accounts don't affect deductibility

Private Ruling Authorisation Number 85315
Money taken from an offset account on IP and used for private purposes does not affect deductibility of interest on the IP

TR 93/6
http://law.ato.gov.au/atolaw/view.htm?locid='TXR/TR936/NAT/ATO

I am sitting near a beach in Thailand so haven't looked these up to confirm.

Thanks all for the quick reply and information on ruling documents. Really appreciated.