Hi all,
Does the workaround still exist where you can effectively create an offset facility by using the loan account itself as a transaction account?
I used to do this a while back, just wondering since they now have actual transaction accounts these days. I'm aware there are implications for investment properties.
Thank you
Taking money in and out of a loan account is not the same as having money wash through an offset account from a tax/investment property perspective.
Starting with the basic investment loan situation, any money that goes into a loan account is seen as a payment against the loan … and therefore, any amount taken out is a drawdown on the loan. You then need to keep records of the purpose for drawing down the loan and only amounts directly relevant investment purposes can attract a tax deduction on the interest. In other words, you might have an "investment loan" of $500k, but if you've been putting money in and out and pulled out $100k over time (maybe over years) to buy groceries or any other non-deductible purchase, you can only claim interest of $400k for tax deduction purposes.
The offset account came along as an innovation to effectively get around the above scenario. Because the money never goes into the loan account (it is only ever in the offset account), the above does not apply. The fact that you have an agreement with your bank to "offset" interest is separate to the loan account. Therefore, you can have money going in and out of the offset account as you see fit and it doesn't affect the loan account in the way I've described above. The net effect is that all interest actually paid on the loan account remains entirely deductible.
There's more to the whole offset story, but the above is what's most relevant to OP's questions.
Hi. I appreciate everything you typed out but none of this relates specifically to UBank. You seem to have missed where I said "I'm aware there are implications for investment properties."
Ah well, may be off use to others who stumble past here …
Maybe one day I will have an IP and check back on your advice :)
Believe there was a Commonwealth bank product like that. Veridian or something similar sounding name. Salary goes straight in, use the credit card then all the money is swept to pay off the card at end of the month.
Most banks have zero fee redraws now, so you could do the same (except some utilities etc might charge credit card fees).