Home loan buyers in Australia must be cautious about "sham arrangements" that promise customers tax deductions to which they are not entitled to and aid them to repay their mortgage, said one expert.
Terry Hayes, a senior tax writer at Thomson Reuters, said the Tax Office is advising Australian citizens to be wary about schemes where several people are offering investment plans in foreign companies, the funding for which is partly given by re-financing of the existing home loan equity of the customer.
Mr. Hayes also said that most customers are not aware about the arrangements involved in home transactions, which requires customers to refinance their existing mortgages through a third party financial institution.
"Tax issues of concern…include the possibility that certain loans may be shams, whether deductions for interest are allowable under the tax law and the possible application of the anti-avoidance rules,” Mr. Hayes said.
His warning may encourage mortgage holders to compare home loans in seeking a safe and regulated mortgage option.
Lisa Montgomery, head of the consumer advocacy at Resi Mortgage Corporation, said on this week’s interview with News Limited that mortgage holders who are worried about defaulting on their repayment should look into purchasing home loan insurance.