Redraw on Owner Occupier - Advanced Question

Sira on 12/07/2020 - 14:16

I have an additional question, to a forum question that is often asked here:

If you have an owner occupied loan of $500k and hold $100k in redraw against it. If i was to switch this loan to an investment loan. I understand I am then only able to claim an interest deduction on the $400k, even if I remove the redraw and total loan balance is $500k.

So my question is: Lets say the above was with lender A for a period of 5 years. I refinance to lender B with a new owner occupied loan for $500k (I put the redraw balance into a savings account prior to the refinance). A new $500k OO loan is established and from day 1 I put the $100k into an offset account this time around.

After a further 'X' years later (say 5) I now decided to switch the OO loan with lender B to an INV loan.

How would the ATO possibly know about the redraw situation that occured with lender A, years ago, at another lender? Has this not just remedied/bypassed the issue with the redraw at lender A?

Financial

Comments

  • [Deactivated] on 12/07/2020 - 14:41

    They would ask for your bank statements. Why not maximise yoyr deductions when you move out, then when you move bank in pump the fubds back in. Ato is ozbargain+ members.

  • netjock on 12/07/2020 - 15:59

    Depends on what you do with the $100k. If you invested in shares then it would be tax deductible.

    If you invested in a BMW then most likely not.

    • Sira on 12/07/2020 - 20:03

      That is a good point, also if you had intended to invest in shares anyway it has less of an impact.

  • Seraphin7 on 12/07/2020 - 17:06
    +2

    How would the ATO possibly know about the redraw situation that occured with lender A, years ago, at another lender?

    Ever heard of an ATO audit?

    • Sira on 12/07/2020 - 20:00

      I have, I'm also aware that banks don't provide statements after +7 years and home loans can run for up to 30-45 years if a person refinances a few time's, back out to 30 years. Therefore I was just wondering what happened in that situation.

      • Seraphin7 on 13/07/2020 - 09:00

        The ATO can basically call on you to produce all records over any relevant period. It's then on you to prove whatever you have told the Tax Office.

        Will what you're proposing trigger an audit? Maybe. Maybe not.

        Can the ATO create a world of pain for you? Abso-****-lutely.

  • elgrande on 12/07/2020 - 19:38

    How would the ATO possibly know about the redraw situation that occured with lender A, years ago, at another lender? 

    Because they monitor OzBargain forums..

    • Sira on 12/07/2020 - 20:11

      Ha, that's good, luckily i'm "asking for a friend" - but seriously I nearly did this! However luckily before making the confirmation of the transfer from the offset, remembered reading something about it. Now it has me curious if I had, or if it had happened with a larger amount… could be very painful.

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