Tax Implications using offset account funds

[Point Break]

Advice needed
We have just gone unconditional on a property in Perth at 80%lvr
We require roughly 140K at settlement
We have released enough equity from another property to cover settlement costs but the funds will not be available until the day of actual settlement and the agent requires the funds 3 days earlier.
So my question is are there any tax implications (not being able to claims costs) for us using our offset cash in PPOR to cover the costs at settlment and then transfer the exact same amount of funds from our new equity account back into offset account PPOR.

I Hope this makes sense and one of our SS gurus can help me
Thanks

 

[Terry_w]

Advice needed
We have just gone unconditional on a property in Perth at 80%lvr
We require roughly 140K at settlement
We have released enough equity from another property to cover settlement costs but the funds will not be available until the day of actual settlement and the agent requires the funds 3 days earlier.
So my question is are there any tax implications (not being able to claims costs) for us using our offset cash in PPOR to cover the costs at settlment and then transfer the exact same amount of funds from our new equity account back into offset account PPOR.

I Hope this makes sense and one of our SS gurus can help me
Thanks

Yes, adverse tax consequences.

 

[moyjos]

Can you apply to delay settlement for 3-5 days?

 

[s0805]

So my question is are there any tax implications (not being able to claims costs) for us using our offset cash in PPOR to cover the costs at settlment and then transfer the exact same amount of funds from our new equity account back into offset account PPOR.

Not an accountant....but i think it will have tax implications. As borrowed money going via PPOR offset will break the link before it is being used for investment purposes....please seek professional advise before taking this path....

May be ask agent that you will give them $1000 for 3 days earlier and rest of them later on....if they still not like that may be offer $3000, 5000 etc....at the end of the day...it is better to lose the tax deductibility on $3000 than $140K.....let us know how you go...
good luck...

 

[Terry_w]

Not an accountant....but i think it will have tax implications. As borrowed money going via PPOR offset will break the link before it is being used for investment purposes....please seek professional advise before taking this path....

In this situation there is no borrowed money in the offset (I think) and this isn't the reason why there would be tax implications.

I interpreted it as money in an offset attached to a PPOR loan was going to be used, 'temporarily', and then later replaced with borrowed money.

This will cause problems because Ditts will not be able to claim the interest on borrowed money used to reimburse herself. Using cash means the item is paid for already and you cannot borrow to pay yourself. You cannot contract with yourself.

The result in using money from the offset is that the interest on the PPOR will increase and this interest will not be deductible - because it is private expense.

 

[Rolf Latham]

The result in using money from the offset is that the interest on the PPOR will increase and this interest will not be deductible - because it is private expense.

double tax take in effect

ta
rolf

 

[s0805]

In this situation there is no borrowed money in the offset (I think) and this isn't the reason why there would be tax implications.

I interpreted it as money in an offset attached to a PPOR loan was going to be used, 'temporarily', and then later replaced with borrowed money.

This will cause problems because Ditts will not be able to claim the interest on borrowed money used to reimburse herself. Using cash means the item is paid for already and you cannot borrow to pay yourself. You cannot contract with yourself.

The result in using money from the offset is that the interest on the PPOR will increase and this interest will not be deductible - because it is private expense.

Terry, I should have word it better....yes i get that ditts is planning to use the offset money for these 3 days and pay it back to the offset account linkd to PPOR...not a a good idea...agree

I still think it is worth giving some money as deposit upfront (private money, if they agree) and rest of the money after 3 days when it settles....i was in same situation and gave 1K before giving rest of the money week later when equity loan settled....OR may be tell agent that you can write them cheque from offset before 3 days but don't deposit it until the loan gets settled...in my case i was even ready to show them letter of offer to prove genuine buying...good luck