hey all<
i have a question, is there a maximum amount u are allowed to put into an offset account?
i have a family member who wants to invest some money but not in shares or property(wants basically little or no risk)but would like higher return than in a term deposit account.
say i owe $80000 on house,
put in the family members $79000 and pay them one percent lower interest rate than my current variable rate(adjusted when rates are).
therefore i get a cheaper loan rate they get a better interest return and the bank gets very little.
will this work?
it seems like to good an idea, am i missing something?
cheers,
rusty[biggrin]No problem with this whatsoever.
All the best,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Hi,
I used to keep my savings in my parent’s offset account. The deal was they would pay me interest based on whatever ING Direct was offering, but calculated daily, compounded daily. I even created a spreadsheet to track the effect of deposits and withdrawals. It was a win-win situation for both parties. I was getting tax free interest and effectively they were reducing their principal!
Cheers,
Jay
**********************************
You must stay pOsitive
…then the cAsHfl0w will come!
**********************************Just remember if the person who owns the money is planning on buying their first property it is hard for them to prove genuine savings.
Cheers,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
What the ATO doesn’t know won’t hurt them right? [cap]
Cheers,
Jay
**********************************
You must stay pOsitive
…then the cAsHfl0w will come!
**********************************Originally posted by The Mortgage Adviser:Tax avoidance is fine
Actually I think tax avoidance is much the same as tax evasion. [ponder]
It’s tax “minimisation” that’s acceptible. [juggle]
GP
Soooo, assuming that you declare the payments from the offset account owner as income to the ATO, you may as well go with ING?
Or is the difference between the ING interest rate and a std variable interest rate enough to make the interest saving of sufficient significance? (assuming you are paying the person 1% less than std variable rate as per Rustry’s suggestion..)
The cashflow advanatge of monthly/fortnightly payments should not be ignored either..
Paul
[email protected]EZ-Rent. The free tax and cashflow simulator for Australian property investors. Version 2 out now!
http://www.ez-rent.comSo if its an ‘informal’ arrangement, with (in my case), my brother in law, the same thing applies?
Knowing the ATO, it wouldn’t suprise me that declaring something as a gift is not enough to satisfy them?
comments?
EZ-Rent. The free tax and cashflow simulator for Australian property investors. Version 2 out now!
http://www.ez-rent.comRusty, in answer to your original question, I don’t think there’s a limit to what you can have in your offset – it’s a transaction account. My parents currently have about $60K over the loan amount in theirs, so there’s no interest that will be charged (but none earned on the extra either)
Cheers
Melthanks for responses, think we will go ahead with it, we also like the idea of the “invested” money in the offset account being available at anytime, compared with a long term interest account.
cheers,
rusty[biggrin]Well I am still scared of the ATO, but I love this idea and it simply never dawned on me before..
I am very naieve to a lot of financial matters. If it was this easy you would think by now that some enteprising person could manage the legalities and manage the process for a management fee. (find the people with the money and introduce them to the person with the offset/loc)
It reminds me of another technique that my wife and I used to obtain our deposit years ago.. Have anybody here ever been involved with the Asian/Vietnamise money lending ‘game’ called Hui?
EZ-Rent. The free tax and cashflow simulator for Australian property investors. Version 2 out now!
http://www.ez-rent.comIn this case, would the person who has taken out the loan still be able to claim the interest paid to the investor?
Adam..
[rolleyesanim]Rob, don’t worry, my folks aren’t crazy. $40K has just been lent to my business partner to buy a car (as soon as his tax return comes back he’ll repay it). $8K has gone to repair my brother’s car, and the other $12K has gone to various loan repayments etc. Now we’re sitting at the limit[
]Cheers
MelYes, lending money is crazy – but I’m the one lending it. I also have access to all bank accounts of my bus partner (and in fact know more about his financials than he does), AND I prepared all his financials for his tax return, so I’ve got no probs getting the money back!! [biggrin]
Cheers
MelEz Rent
can you tell use more on ‘hui’. I remember one of my friends purchased his car using money form a hui.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Where’ve Rob’s posts gone? I look like I’m talking to my imaginary friend now[specs]
Cheers
MelI have just started a IP loan with an offset account. The loan is $113k. $30k in the offset. 7.8% p/a. My sister wants me to invest a large amount of money for her. If I use a portion (say %70k) and put it in my offset account (in NZ). I would give her (say 5.5% compound interest). I would then only have interest calculated against $13k.
Would this mean out of loan repayments of $185/wk $20 would be interest and the rest would go off the principal. That sounds good but what happens at tax time when I have received $10k in rent? Does this get slugged with CGT?
Thanks
Nugen
Nugen, not CGT, but probably income tax.
You would calculate the interest you are paying to your sister as a cost to you also though, so it’s not as big as you first thought.
but if you are making a profit, then yep, the tax people will come for you…
Cheers
MelMelbear
So if I told the taxman that my sister loaned me $70 at 5.5% and I used that to put in my offset account would that be illegal? Because I am thinking of getting her to invest in my whole loan. If that is the case would my repayments to the bank be 0? Then my saving would be bank interest minus my sisters interest.
Nugen.
Nugen, if your sister puts enough money in your account that your balance is 0 for your loan (don’t put anymore cos it’s a waste as you will not ‘earn’ interest), then yes, your payments to the bank will be $0 – unless they have a monthly fee…
You will then pay to your sister 5.5% on the money, and that is what you will tell the taxman that you have paid. She will also tell the taxman that 5.5% is what she earnt…
Cheers
Mel
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