Risk free interest rate better than the banks

Magnate on 19/07/2012 - 17:24

Here me out here as this is a bit convoluted.

You can ammend your tax return at any stage after submitting it to add additional deductions. See http://www.ato.gov.au/content/00314025.htm

The ATO will then pay you any additional amount you are owed, plus the Shortfall interest rate on this additional amount you are owed. The shortfall interest rate is currently 6.66% and appears to be consistently above that offered by the banks (see http://www.ato.gov.au/content/65367.htm)

What is to stop you intentionally not claiming a significant deduction (or deductions), and then claiming it a year later, thus earning a high rate of interest on the differential? Granted this is only going to be worthwhile if you have some big deductions.

Comments

  •  
    cloudy on 19/07/2012 - 21:19

    U can do that, from what I understand, back in the day, people did it all the time.

  •  
    cloudy on 19/07/2012 - 21:25

    Also, isn't ubank higher? Plus getting ur money back isn't as easy as loggin in ur bank account and withdrawing. U could wait up to 28 days for the money to be credited back, normal processing time.

  •  
    Magnate on 19/07/2012 - 21:52

    Ubank if you meet all the conditions is 5.71%.
    Yes you are correct, so this is more like a term deposit than an at call savings account.

  •  
    mattgal on 19/07/2012 - 22:24

    nothing's going to be risk free

  • +1 vote
    qazwsx on 19/07/2012 - 23:32

    wrong interest rate mate
    http://www.ato.gov.au/individuals/content.aspx?menuid=0&doc=...

    and if you look at how it is calculated, it is simple interest and not compounding daily. ato not really that stupid (trust me i deal with them on a nearly daily basis - they're slow (painfully slow), sneaky, cunning, etc. but not exactly stupid).

  • +1 vote
    scotty on 20/07/2012 - 10:48

    My question is — interests from money owed by ATO, are these taxable income? Can make a huge different if it's not.

    •  
      leiiv on 21/07/2012 - 20:21

      In my understanding, it is taxable, so you need to include the interest in the next year tax return.

    •  
      qazwsx on 25/07/2012 - 22:50

      of course it is. refer to post above re: ato not stupid.

  •  
    geordie on 22/08/2012 - 23:19

    I think you can only claim back a limited amount of time, maybe three years. I put in some ammendments a while ago after I found out the accountant I had been using was hopeless and missed many years worth of deductions I was entitled to.

    •  
      Trance N Dance on 23/08/2012 - 18:02

      IIRC it's as long as you want, just that you have to keep the proof for deductions for a further 7 years from the time of claiming.

  •  
    shoppe on 04/10/2012 - 13:29

    haha…..sorry mate, I had to laugh….a classic mistake.

    The table is called - 'Shortfall interest charge'. Its what they CHARGE you. Yes it's higher than the banks. Not surprisingly, it's less than what they PAY you, if you claim a tax refund. (see qazwsx comment above for a link to that table). What they pay you is approximately about what you'd get from the bank.

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