Why pay our ato debt with a tax debt mortgage?
- The Federal government want to give the ATO powers to notify credit reporting agencies of outstanding tax debt. Essentially, for debts over $100,000 and more than 90 days in arrears.
- Each lender has an Australian credit licence with ASIC. Therefore, when they do apply for a licence, they must detail the type of lending they are offering. As a result, tax debt consolidation using a home loan would not be allowed under their licence. Therefore, it would then cause the lender an ASIC regulatory issue. Additionally, a personal loan would also have the same issue and able to be provided as a tax debt loan.
- Why pay our ato debt with a tax debt mortgage?
- Many of our clients with a home loan ask; why pay tax debts with my mortgage? As a result, I thought I would put some information here regarding this topic. On face value, it may seem better to pay your tax debt with a personal loan. Although, tax debt paid with a personal loan is near impossible. However, it is still a common question. When you look deeper, however, there are some inherent issues to consider, which I will go into below.
- Okay. Are there any personal loans available to pay tax debt instead of a tax debt mortgage? The short answer is yes. The longer answer is that lenders offering these loans have limited capacity to pay tax debts. They can often only lend small amounts. In that case, you could commonly enter under an arrangement with the ATO. If you do that, you will most likely be offered a better interest rate by the ATO. In that case, there would be no benefit in establishing a personal loan to pay a tax debt.
- Who are the lenders that can provide a tax debt loan to meet your needs? These lenders are generally not mainstream lenders such as the big four banks. They have generally been around for greater than 15 years and offer some specialty finance solutions. Importantly, their ASIC licence allows them to lend for tax debt purposes. Each of these lenders has very different fees and interest rates for their tax debt mortgages they offer. Therefore, we would complete a tax loan assessment. Hence, this would ensure we can identify the most cost-effective tax debt lender for our clients and confidently apply for the tax debt mortgage that suits.
- I have a tax debt judgement - can I still obtain finance? Yes, we have lenders who can assist even with large tax debt judgements.
- Use of your home loan to pay tax debt allows for greater capacity to pay large tax debts. Often an additional benefit is that tax debt home loan terms are longer than available with the ATO, or other forms of finance. As such, this means you would have a better chance of meeting the payments required in the short and long term.
- Do I need to keep my tax debt mortgage with this lender? No. Usually, the tax debt mortgage is a short term proposition, with a short to the medium-term goal of refinancing back to a traditional lender.
- Can I apply for a loan for another purpose and use it to pay for the tax debt? Aside from the obvious; which is a fraud. Certainly, tax debt is noted within your tax returns. Plus lenders confirm the balance of your ATO portals before settlement. One of the common lender policies is that the applicants need to have no tax debts. Therefore an inexperienced banker may submit your loan (to improve his submission stats for his boss), and your loan would be declined. Down the track, though, the effect of this would be that you could be closer to receiving a tax debt judgement. Your loan term prospects for refinancing back to a traditional lender may be hindered because of this judgement.
We specialise at helping clients with this type of finance. You can imagine already that inexperience by your broker will only compound your situation. So contact Loan Saver Network. As we deal with these tax issues daily and can provide the advice and solutions you need.
Tax debt and the ATO are not to be taken lightly. The ATO does bankrupt individuals and liquidates businesses often. Therefore, you need to put yourself into action to pay urgent tax debts as fast as practical. If you need any further information about using your mortgage to pay a tax debt, then contact Loan Saver Network today on 1300 796 850.