No. This is one case where your "intention" does not count.
Redraw = new loan.
Offset = your money, do what you like.
Small Redraw Mistake - Can I be dodgy?
- Thread starter Burnar
- Start date
No. This is one case where your "intention" does not count.
Redraw = new loan.
Offset = your money, do what you like.
No, intention doesn't matter. Do you want me to use the urine analogy?
In this case your mate may have borrowed from the parents. This is a loan. So if he were to move out and rent the place he could reborrow from the bank and repay the loan to his parents. This would be refinancing one loan with another and doesn't change the underlying deductibility.
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May need to make amended tax returns.
This is the first year that it has been an income producing property, so I won't have to amend any previous tax returns, I assume.
Do you think $10k (or $6k as the case may be) is small enough to go unnoticed?
And is an audit the only thing that will alert the ATO to the problem if I do decide to...
this would probably be the easiest way
whether it is acceptable i wouldnt know but if you did get audited and they worked it out and they owed you money then thats a bonus for you...
failing that you could ignore the situation as "you think its not a problem" and then if audited you would probably only get a slap on the wrists... and have to sort it out
but who wants to get audited in the first place probably cost more than ignoring it
BMan
Slap on the wrists no longer apply in audits. The old days are gone. Starting point is commenly 95% penalties plus interest. 75% for intentional disregard plus the 20% uplift penalty. Then up to the taxpayer to argue otherwise. Done enough prudential audits for other accountants now to know the ATO softly softly days are long gone. In more serious cases they are bringing in the anti-money laundering act, crimes act, etc.
Slap on the wrists no longer apply in audits. The old days are gone. Starting point is commenly 95% penalties plus interest. 75% for intentional disregard plus the 20% uplift penalty. Then up to the taxpayer to argue otherwise. Done enough prudential audits for other accountants now to know the ATO softly softly days are long gone. In more serious cases they are bringing in the anti-money laundering act, crimes act, etc.
Ok Terry, it looks like nobody else is going to ask: what's the urine analogy?
I assume it has something to do with ******* in a glass of water and trying to only drink the water.
I though you would never ask.
Take an 800ml glass of water and place 200ml of urine in there by mistake. You had no intention to place the water in there as you were going to drink it later.
The water may have only been in there for 2 seconds before you realise the mistake and take 200ml out again.
Would you drink the water?
See I.P Freely v Federal Commission of Taxation HCA [2005] 245
Take an 800ml glass of water and place 200ml of urine in there by mistake. You had no intention to place the water in there as you were going to drink it later.
The water may have only been in there for 2 seconds before you realise the mistake and take 200ml out again.
Would you drink the water?
See I.P Freely v Federal Commission of Taxation HCA [2005] 245
its funny how people believe something because thats what they have heard and dont believe someone who is in the know or looked into it etc
i had this same thing happen at smoko the other day where they were talking about getting taxed on your feed-in tariff from the solar panels
everyone believes they would get taxed for it i stated that if its a business you do but if your not claiming anything then its not taxable income but they still didnt believe me... meh there choice
Hi
I have a 250k loan. I also have an offset account and credit card accounts. All with the same bank.
My PPOR is currently rented out, so I would like to claim interest deductions etc. The rent money is paid into my offset and the interest comes out of my offet account once a month. My salary goes into another account with another bank.
Once, and only once, I paid off the wrong account - I was trying to pay my credit card account from my offset but I pressed the wrong button and paid the funds into my loan account. It was about $700-900.
The bank redrew the money for me back into my offset account, which I then transferred into my credit card account.
Please tell me the interest in my offset account is still deductible??? If not, how can I rectify the situation?
Please use numerical examples. The urine just confuses me....
Thank you.
I have a 250k loan. I also have an offset account and credit card accounts. All with the same bank.
My PPOR is currently rented out, so I would like to claim interest deductions etc. The rent money is paid into my offset and the interest comes out of my offet account once a month. My salary goes into another account with another bank.
Once, and only once, I paid off the wrong account - I was trying to pay my credit card account from my offset but I pressed the wrong button and paid the funds into my loan account. It was about $700-900.
The bank redrew the money for me back into my offset account, which I then transferred into my credit card account.
Please tell me the interest in my offset account is still deductible??? If not, how can I rectify the situation?
Please use numerical examples. The urine just confuses me....
Thank you.
Hi
I have a 250k loan. I also have an offset account and credit card accounts. All with the same bank.
My PPOR is currently rented out, so I would like to claim interest deductions etc. The rent money is paid into my offset and the interest comes out of my offet account once a month. My salary goes into another account with another bank.
Once, and only once, I paid off the wrong account - I was trying to pay my credit card account from my offset but I pressed the wrong button and paid the funds into my loan account. It was about $700-900.
The bank redrew the money for me back into my offset account, which I then transferred into my credit card account.
Please tell me the interest in my offset account is still deductible??? If not, how can I rectify the situation?
Please use numerical examples. The urine just confuses me....
Thank you.
I wouldnt worry too much. If the bank reversed the transaction there should be no problem. Even if they didn't reverse it and just withdrew the money the ATO isn't going to be too hard on you - if they even pick it up. And if it does become an issue then the interest would only be about $50 per year.
Thank you for your prompt reply.
Am I correct that in theory, I am only allowed an interest deduction of ($250k-$900)/$250k from the date I made that mistake onwards? 99.64%.
Or conversely speaking, if my interest payments are, say $1500/mth - I would not be allowed to deduct the entire $1500 but only $1,494.60.
I think I made that mistake about 9 months ago.
You know what, to save myself sleepless nights later, I am going to go to the bank and ask them to shut down that offset account and set up a new identical one for me.
Hmm. Should I ask for a bank cheque then? Bank cheques cost money. I could transfer all the money into my offset into my 'everyday-use' account - it's a visa debit account, shut down the offset, set up a new offfset, the transfer the money back from the everyday-use account into new offset.
Any caveats for me?
Thank you.
Am I correct that in theory, I am only allowed an interest deduction of ($250k-$900)/$250k from the date I made that mistake onwards? 99.64%.
Or conversely speaking, if my interest payments are, say $1500/mth - I would not be allowed to deduct the entire $1500 but only $1,494.60.
I think I made that mistake about 9 months ago.
You know what, to save myself sleepless nights later, I am going to go to the bank and ask them to shut down that offset account and set up a new identical one for me.
Hmm. Should I ask for a bank cheque then? Bank cheques cost money. I could transfer all the money into my offset into my 'everyday-use' account - it's a visa debit account, shut down the offset, set up a new offfset, the transfer the money back from the everyday-use account into new offset.
Any caveats for me?
Thank you.
Yes, in theory that seems correct.
This won't help at all. The problem is not the offset account but the fact that you borrowed money for private expenses from the loan which was an investment loan. This created a mixed loan.
If you really wanted to fix it you could refinance and split the loan into $900 and the investment portion. Then you could just repay the $900 non deductible loan. If you just paid $900 into the mixed loan now you wouldn't be able to pay this $900 off by itself as each repayment would dilute the entire loan so only 0.36% of each repayment would come off the $900.
But, hangon. Did you have a $900 expense that you could have borrowed that $900 to pay? That may 'solve' the 'problem'.
Oh I see thank you. I thought just breaking the nexus between the offset and the loan would be sufficient. Now I see I have to get to the root of the problem. (I did dream up some examples using gangrened/cancerous body parts and amputations but I decided against using them as I'm trying to keep to the numbers).
What a hassle!!!!! I am kicking myself for making that stupid mistake!!!! OK, so I should go to the bank tomorrow and ask for 2 new loans. 1 loan of $250k-$900 and a seperate loan of $900.
I have lots of expenses - the usual strata, water, council, property management fee....but nothing that would really justify taking $900 out....
I just don't want this to come back to bite me in 6 year's time or something (I will have burnt my records after the required 7 years).
Or maybe I'll just ignore it....
What a hassle!!!!! I am kicking myself for making that stupid mistake!!!! OK, so I should go to the bank tomorrow and ask for 2 new loans. 1 loan of $250k-$900 and a seperate loan of $900.
I have lots of expenses - the usual strata, water, council, property management fee....but nothing that would really justify taking $900 out....
I just don't want this to come back to bite me in 6 year's time or something (I will have burnt my records after the required 7 years).
Or maybe I'll just ignore it....
Firstly, you should not burn your records!! You need to keep them for CGT purposes and for other reasons too - what if there are new tax concessions introduced and you need to go back to work out costs on the property etc.
Secondly, refinancing into 2 loans and 1 being only $900 would be costly and time consuming. Interest on $900 is only about $50 per year, so even if you are audited by the ATO it is not going to be a major drama.
Secondly, refinancing into 2 loans and 1 being only $900 would be costly and time consuming. Interest on $900 is only about $50 per year, so even if you are audited by the ATO it is not going to be a major drama.
In case it went over people's heads this was a joke.
Were they related to I.P.Daley who authored "The Yellow River"?
The Y-man
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