How can we help?
Are my returns taxable?
Yes, the net income earned on your Portfolio will be assessable for tax.
If you do not provide your Tax File Number, we are required to withhold tax from your net interest earnings at the highest marginal tax rate. This rate is currently 45%. This amount is remitted to the ATO. If you provide your TFN, we will not withhold any tax.
To make it easy for you to complete your tax return, we will provide an annual statement that outlines the interest you have earned and the net of our fees.
Please refer to our Product Disclosure Statement for further information regarding tax on your RateSetter investment. The tax implications outlined in our Product Disclosure Statement are general in nature and do not take into account your specific circumstances. You should obtain specific taxation advice from a suitably qualified taxation advisor before investing.
Why did I receive my loan repayment before the indicative loan term?
For borrowers, one of the attractive benefits of taking out a loan on the RateSetter platform is the ability to repay their loan early without facing any early exit fees or charges. This does mean that the lender may occasionally be repaid early. Lenders can use reinvestment settings to ensure their funds are automatically reinvested back into a lending market of their choice if this happens.
Is RateSetter a bank?
RateSetter is not a bank, and RateSetter investor accounts are not bank accounts. RateSetter is not authorised under the Banking Act 1966 (Cth), nor is it supervised by the Australia Prudential Regulation Authority.
RateSetter is regulated and licensed by ASIC, holding both an Australian Financial Services licence (number 449176) and an Australian Credit Licence (number 449176).
Why is my rate of return less than the rate at which I invested?
Our displayed rates of return may assume that a lender is reinvesting their borrower payments into the same lending market at the same rate. If your actual rate of return is less, this may be because of processing times, because you have not reinvested your repayments, or because you have reinvested them at a lower rate than the original rate of your order.
Does this mean that as an investor in the 3 Year Income, 5 Year Income or National Clean Energy lending markets I can be matched to new loans or replacing another investor in their loans?
Yes. Investors will not know if they are funding a new borrower loan, or replacing an outgoing lender via a loan to the early access facilitating partner.
Does the Provision Fund guarantee I will not suffer a loss?
No. We believe the Provision Fund provides meaningful protection for investors, and to date, no investor has lost any principal or interest due. However, it’s important to remember that the Provision Fund is neither a guarantee nor an insurance product and your capital is at risk. Hence, in the event of a borrower late payment or default, an investor may not be fully or partially compensated.
If you are not compensated by the Provision Fund in the event of a borrower late payment or default, you may instead benefit from a number of debt collection or recovery processes undertaken by RateSetter, which may or may not recover any funds.
Please read our Product Disclosure Statement for more information.
What is the Provision Fund? How does it work?
The Provision Fund is designed to help provide investors with ongoing protection against borrower late payments or loan defaults. It is not a guarantee or an insurance product.
RateSetter in the United Kingdom was the world’s first peer-to-peer platform to introduce a Provision Fund to help protect lenders from financial loss in the event of a late borrower payment or default. This innovation represented a significant evolution in peer-to-peer lending, helping to make it simpler and safer for investors.
The money in the Provision Fund comes from charges paid by borrowers. When a borrower applies for a loan, they may be required to pay a charge (the Risk Assurance Rate or Risk Assurance Charge), the amount of which is determined by a number of factors, such as their credit rating from independent credit bureaus. Borrowers pay the the Risk Assurance Rate or Risk Assurance Charge into the Provision Fund.
Although the Provision Fund is funded by borrowers, it has been established for the benefit of lenders. RateSetter may, at its discretion, instruct the Provision Fund’s trustee to pay an amount out of the Provision Fund to compensate lenders for a loss arising from a borrower default. Importantly, funds held in the Provision Fund are held for the benefit of investors. RateSetter cannot use these funds for its own purposes. The Provision Fund can only be used to compensate investors for losses of principal and/or interest.
For further information about the Provision Fund, see the Product Disclosure Statement.
What happens if the rate that applies to an outgoing lenders loan is different to the rates being offered by replacement funders? (i.e. What is the capital discount?)
The interest rate that applies to a loan withdrawn via an early access transfer may differ from the interest rate associated with the loan that replaces it. Consequently, the outgoing lender may receive less than the current face value of their loan.
For example, if the interest rate of a replacement funder’s lending order is greater than the interest rate on the relevant early access loan, we will discount the early access loan. This ensures that the economic return expected by the replacement funder (given the rate specified in their lending order) is met, and also means that payments under the early access loan remain the same.
For example, say an individual loaned $1,000 in the 3 Year Income market at a rate of 8% per annum. If, when they seek to withdraw their loan using an early access transfer, the prevailing interest rate in the market has increased to 10% per annum, we will use the capital discount to ensure that the lender who replaces them (at 8% p.a.) receives an economic return equivalent to 10% per annum. In other words, we would discount the value of the outgoing lender’s loan to ensure a fair return for their replacement.
Where an outgoing lender receives less than the face value of their loan following an early access transfer, they may be able to recognise the reduction in value of their loan interests as a tax or capital loss.
Can I draw an income from interest payments and reinvest capital?
Yes, you can. By combining the ‘Reinvestment’ and ‘Auto-Withdrawal’ settings, you can re-invest only the principal component of the payments you receive and draw an income to your nominated bank account.
How to enable the reinvestment of principal amounts paid
Log in to your RateSetter account, then click ‘Reinvestment settings’ in the left hand menu. You can then enable the reinvestment of your principal from the relevant lending market to the lending market of your choice. Interest will accumulate in your holding account as it is paid.
How to automatically withdraw the balance of your holding account
To automatically withdraw the accumulated interest in your holding account to your nominated bank account at a frequency of your choice, simply enable the auto-withdrawal setting. Log in to your RateSetter account, click ‘Withdraw funds’ in the left hand menu, and then choose ‘Auto-withdrawal’ and follow the prompts. Please note that you will need to have made a successful manual withdrawal before being able to use the auto-withdrawal feature.
Where is money held before it is on loan?
Funds in your holding account and funds on market waiting to be matched with borrowers are held in cash. These funds are held on trust in an account with an Australian Authorised Deposit-taking Institution, in the name of RateSetter’s appointed custodian.
The custodian also acts as the legal lender of record in relation to loans made to borrowers.
What fees are payable?
In relation to the early access transfer feature, outgoing lenders may pay a fixed fee of up to 1.5% of the amount paid to them by the early access facilitating partner (i.e. net of capital discount).
How is risk managed?
RateSetter has put in place a number of measures designed to minimise the risk of investors losing money due to borrowers making a late payment or defaulting on their loan.
Firstly, we are very cautious about who can borrow using RateSetter. Before any borrower is approved for a loan, our underwriting team verifies their identity, checks their credit, and assesses their risk. RateSetter only lends to creditworthy individuals with Australian residency. You can view statistics about our credit performance by registering as an investor (this is free and there no obligation to lend) and clicking the “RateSetter data” tab.
Secondly, the Provision Fund exists to help protect lenders from loss. The Provision Fund is not a guarantee nor an insurance product. However, thanks to the Provision Fund no RateSetter investor has lost a cent of principal or interest. Learn more about the Provision Fund.
Thirdly, we employ an experienced, specialist debt collection agency to help us retrieve late payments or defaulted loans. Until an investor’s funds are lent out, they are held in trust by an independent custodian in a bank account at an Australian Authorised Deposit-taking Institution.
Finally, to satisfy obligations under our Australian financial services licence (AFSL) and Australian credit licence (ACL), we undergo a number of external audits every year. This ensures that investor funds are properly accounted for and our platform is operating as it should.
Read our Product Disclosure Statement to learn more about the risks of investing