The Meeting Place > Let's Talk Retirement > Offset Accounts

Offset Accounts

avatar
Albert
7 yrs ago

If offset accounts are considered as financial assets (see Age Pension, Income and asset tests > Are offset accounts an asset?), and therefore are subject to deeming, is it then reasonable to treat the interest saved through the offset against an investment loan as an expenditure against the rental income?  Otherwise the said asset would be deemed twice.

1 comments

 

How do you treat Interest saved as an expense (grossing up ???)

Might have to check with your tax accountant, but i should think its not allowed

Doesnt make sense to me 

Money in your offset account is an asset and I assume will be deemed at 1.75/3.25%

 

avatar
Albert
7 yrs ago

Thanks Carlos.  Let me clarify by way of an example.

Let's assume an investment loan amount of $300k and a linked Offset account of $100k.  At 5%pa, the offset account would save $5k on bank interest and effectively "boost" the assessible gross rental income by the same amount.

As a financial asset, the offset account would be deemed to generate an income of $2026 (1.75/3.25% for couple).

By treating the offset account as an asset and taking the gross rental income at face-value, the combined income from the said offset account equates to $7026.  This inaccurate figure could unfairly reduce one's pension or eligibility.

If it wasn't wan offset account - you would earn interest on the credit balance and pay gross interest on the debit balancre.

same same Albert 

albeit the savings in interest for offset is higher because of bank margins on interest paid vs interest charged 

1 comments



To make a comment, please register or login

Preview your comment