ok... heres the ATO ruling relating to offset accounts, which should address the issue once and for all. Took 3 seconds to Google it. Type in ATO and Offset, and voila! Relates specifically to the definition of an offset account for income tax purposes. Hopefully this provides you guys with comfort that the Rate Busters ( ie Firstmac) product, or any other non banks offset product is entirely compliant, and you can start using them
No excuse now lads...after all, its sold at a cheaper rate than any pro pack loan - it promotes competition, and your concerns about its legitimacy/suitability for your customers from a tax perspective, should now be laid to rest.
http://law.ato.gov.au/atolaw/view.htm?locid='TXR/TR936/NAT/ATO
Please note the following paragraphs, specifically;
8. If an account is made up of a series of sub-accounts, some of which are used for deposits and some for loans, then the sub-accounts will be treated, for the purposes of this Ruling, as separate accounts. Consequently, a loan offset account arrangement involving such accounts will fall for consideration under the principles applying to dual accounts (paragraphs 6 and 7)
- see the link for 6 and 7. The Rate Busters (ie Firstmac) product meets both points.
14. Is there a limit on the kind of loan account that can be linked with a deposit account? No. There is no limit on the nature of the loan account which may be made the subject of loan account offset arrangement provided that the loan and deposit accounts are with the same financial institution.
Once again- the Ratebusters/Firstmac product complies.
25. This Ruling applies to years commencing both before and after its date of issue. To the extent that this Ruling differs from any private ruling given by this Office to a financial institution offering a loan account offset arrangement, this Ruling will only apply to customers of that institution from 1 July 1993
- Complies
Example 1 - An acceptable loan account offset arrangement
26. The XYZ Building Society offers its customers a dual account offset arrangement called the Loan Extinguisher Account ( refer to paragraph 8 above, which clearly states that a sub account is treated the same as any other offset "account", so in this instance the Rate Busters- ie Firstmac product is compliant and treated exactly the same as an account provided by a credit union, building society , bank or any other ADI). Customers are invited to deposit funds into the Loan Extinguisher Account with no right to interest. In return XYZ gives a reduction in the interest charged on the loan account. The customer's only entitlement is to the reduction in the interest charged on the home loan.
-Complies
27. The XYZ Building Society uses a two-step calculation of the interest payable on the Loan Account.
28. Step 1 is to charge a reduced rate of interest on that part of the balance of the Loan Account which equals the amount credited as the balance of the Loan Extinguisher Account. The rate charged on this part is the difference between the current Loan Account lending rate and the rate of interest payable on such a balance in an ordinary deposit account. Step 2 is to charge the normal lending rate against the balance of the Loan Account.