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Offset account on a home ('N Yes I do mean a Home - As in a PPOR); A question on tha tax implications of tha offset account?
Topic Started: 8 Jan 2017, 12:38 AM (1,039 Views)
herbie
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Never had one meself so don't know ...

But woz talkin' ta a dude today wot tells me his tax accountant 'deems' tha value conferred on him by same as income 'n declares it as such - On his tax return like.

I woz genuinely surprised by that. Tho more fool me maybe? But regardless:

* Is that usual/normal/genuinely required?

* Might I be missing something else that should otherwise be obvious???
Edited by herbie, 8 Jan 2017, 12:39 AM.
A Professional Demographer to an amateur demographer: "negative natural increase will never outweigh the positive net migration"
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Rufus
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herbie
8 Jan 2017, 12:38 AM
Never had one meself so don't know ...

But woz talkin' ta a dude today wot tells me his tax accountant 'deems' tha value conferred on him by same as income 'n declares it as such - On his tax return like.

I woz genuinely surprised by that. Tho more fool me maybe? But regardless:

* Is that usual/normal/genuinely required?

* Might I be missing something else that should otherwise be obvious???
If you mean the interest saved being treated as income - I've never heard of that being done.
Take risks - if you win you will become wealthy, if you lose you will become wise
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herbie
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Rufus
8 Jan 2017, 12:47 AM
If you mean the interest saved being treated as income - I've never heard of that being done.
Yes, that's what I mean. 'N Thanks Rufus because it struck me as damn strange as well?

Hmmm - I'll 'triple' clarify when next we meet up face ta face then.
A Professional Demographer to an amateur demographer: "negative natural increase will never outweigh the positive net migration"
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Foxy
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Zero is coming...

Why not just pay the loan off altogether???
http://www.afr.com/content/dam/images/g/n/2/1/u/8/image.imgtype.afrArticleInline.620x0.png/1456285515560.png
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zaph
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Your friend needs to get a new accountant.
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Bardon
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Offset accounts are the way to go, most of the time even for a PPR.

The list of benefits is huge, you should think about getting one now and making sure the kids are all set up with one each.
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Rastus2
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Bardon
8 Jan 2017, 08:01 AM
Offset accounts are the way to go, most of the time even for a PPR.

The list of benefits is huge, you should think about getting one now and making sure the kids are all set up with one each.

1 for the offset account comment.


As for deeming it as income for the ATO, for what purpose ?

There is no interest, so there is no income to declare.

However...

One coluld argue there is a financial benifit due to the offset nature against interest charged, indeed the DSS does that.

Explanation: Deeming applies to home loan offset accounts but does NOT apply to a line of credit accounts.
Here..
http://guides.dss.gov.au/guide-social-security-law/4/4/2


I was not aware of this, but it seems your friends accountant may be right.

Shadow - Defrauded his Bank ? 2015 I have 9 different loans and my bank had no idea which ones were personal and which were investment. They had half of them classed incorrectly. When this change came in they asked me to tell them if any personal loans were incorrectly classed as investment, which I did, and they switched them to personal for the lower rate. They also had a couple of investment loans incorrectly classed as personal. They didn't ask me about those. So they stay on the lower rate too. Worked out pretty well. :)
Shadow - 2008 Sydney Median House Price 1.25M by 2014-2015

Shadow : I think this boom has already begun in several cities. My prediction :
Peak of boom: 2014-2015. Sydney Median Price: $1,250,000 Bottom of bust: 2017-2018. Sydney Median Price: $1,100,000

Shadow's Original 2010 House Boom and Crash prediction http://s836.photobucket.com/user/rastus22/media/shady-orig-2010-chart.png.html?sort=3&o=0

Shadow's attempt to edit his 2010 chart in 2015 and replace it with one that does not show a crash in 2013 http://s836.photobucket.com/user/rastus22/media/Screen%20Shot%202015-06-06%20at%207.12.52%20pm_1.png.html
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Rufus
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foxbat
8 Jan 2017, 01:00 AM
Why not just pay the loan off altogether???
Because if the home owner chooses to buy a better or more suitable house, and the house becomes an investment property they are better off with as much in tax deductions as possible, and arranging the lowest possible debt on their new PPOR. The best setup being an 80% loan for the new PPOR to avoid LMI and surplus cash in a new offset account.

I have several clients who love paying off a house and buying another one which they move into, and they end up hurting themselves by not using an offset account to ensure that they get the maximum tax deduction on their debts. Partly because loans that offer an offset account sometimes have higher fees (save $350 per annum to lose Thousands $ in tax deductions) and partly because they just can't look at the big picture and visualise how they will structure their next move to get that tax deduction.

Nevertheless people are getting much smarter with tax deductions as they become educated on this issue, hence the rise in interest only loans even for PPOR's which may later become IP's.

Take risks - if you win you will become wealthy, if you lose you will become wise
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zaph
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Rastus2
8 Jan 2017, 08:50 AM
There is no interest, so there is no income to declare.

However...

One coluld argue there is a financial benifit due to the offset nature against interest charged, indeed the DSS does that.

Explanation: Deeming applies to home loan offset accounts but does NOT apply to a line of credit accounts.
Here..
http://guides.dss.gov.au/guide-social-security-law/4/4/2


I was not aware of this, but it seems your friends accountant may be right.
Quote:
 
There is no interest, so there is no income to declare.

Correct. There is no income tax payable on 'deemed' interest from an offset account. Herbie's friend should amend his previous tax returns if he has been paying tax on deemed interest from an offset account.

Your link to deeming for assessment of welfare by DSS is totally separate to income tax. Interesting though. I suspect there is a huge amount of middle-class dole bludgers (aka family tax benefit recipients) that are ignorantly not declaring their offset deemed income. Maybe Barnaby can get his Centrelink rorters software update to send out debt notices to all these bludgers?

I suspect that the story has changed each time it is told. Accountant >friend >Herbie
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Rastus2
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zaph
8 Jan 2017, 09:19 AM


Correct. There is no income tax payable on 'deemed' interest from an offset account. Herbie's friend should amend his previous tax returns if he has been paying tax on deemed interest from an offset account.

Your link to deeming for assessment of welfare by DSS is totally separate to income tax. Interesting though. I suspect there is a huge amount of middle-class dole bludgers (aka family tax benefit recipients) that are ignorantly not declaring their offset deemed income. Maybe Barnaby can get his Centrelink rorters software update to send out debt notices to all these bludgers?

I suspect that the story has changed each time it is told. Accountant >friend >Herbie

agreed, there is a far higher chance that herbie / herbie's friend is confused than his friend's tax agent.

The full story direct from the tax agent's mouth might be better to base a question on.. I suspect the data being fed to the ATO is not used in the manner being proposed (ie. as taxable income) ... or that the offset account is not quite as simple as mine... there are some so called "offset accounts" that muddy the financial waters as far as the ATO is concerned. They are mentioned in the ruling below.

http://law.ato.gov.au/atolaw/view.htm?locid=%27TXR/TR936/NAT/ATO


Edited by Rastus2, 8 Jan 2017, 10:02 AM.
Shadow - Defrauded his Bank ? 2015 I have 9 different loans and my bank had no idea which ones were personal and which were investment. They had half of them classed incorrectly. When this change came in they asked me to tell them if any personal loans were incorrectly classed as investment, which I did, and they switched them to personal for the lower rate. They also had a couple of investment loans incorrectly classed as personal. They didn't ask me about those. So they stay on the lower rate too. Worked out pretty well. :)
Shadow - 2008 Sydney Median House Price 1.25M by 2014-2015

Shadow : I think this boom has already begun in several cities. My prediction :
Peak of boom: 2014-2015. Sydney Median Price: $1,250,000 Bottom of bust: 2017-2018. Sydney Median Price: $1,100,000

Shadow's Original 2010 House Boom and Crash prediction http://s836.photobucket.com/user/rastus22/media/shady-orig-2010-chart.png.html?sort=3&o=0

Shadow's attempt to edit his 2010 chart in 2015 and replace it with one that does not show a crash in 2013 http://s836.photobucket.com/user/rastus22/media/Screen%20Shot%202015-06-06%20at%207.12.52%20pm_1.png.html
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