Author Topic: Aussie advice  (Read 2258 times)

Grogounet

  • Bristles
  • ***
  • Posts: 264
  • Location: Australia
    • http://www.quest2independence.com
Aussie advice
« on: March 06, 2016, 08:58:25 PM »
Hi everyone,
I'm trying to fine tune my investment plan and need help with some of my questions that stay unanswered even after some research:

- I want to start building a cash amount against one investment property I have for security. According to my research, That gives me two choices:
Start building a savings account on the side. That would be at 3.50% (before tax). Not sure if this is the best way..
Or put the extra savings against the off set account. But that would reduce my tax return - It s negatively geared of course
How do you guys do this usually?
It s an investment property currently valued at $520 - $550 on which I have $500k of loan, 100% variable. $455 rent per week. High strata.

- My second question: Where do you guys invest into foreign bank accounts? I'm not looking at tax fraud, I'm really looking at a bank, in a stable environment, that will provide some sort of return, which will help me diversify against being dependent only in one country.


In details, my plan is:
- Building a stash account at $50k sitting on it permanently - I have $14k to date and put around $6-7k every months on it. Should be done by the end of the year.
- When the stash is built, I will:
Open an investment account (investment bond) and will put automatically $1k on it every month
Open LICs and put around $2k a month on it every months. Automated Revinvestment option.
Open some sort of account (or use the offset) to start reimbursing my investment property as per above - $2k a month
Start diversifying regionally by buying RE in Europe (where I come from) - Target is pos gearing with little money upfront
Put some cash overseas as per my question above - Where, when, how much, details on how to transfer, TBC...

marty998

  • Walrus Stache
  • *******
  • Posts: 6623
  • Location: Sydney, Oz
Re: Aussie advice
« Reply #1 on: March 06, 2016, 11:37:44 PM »
Start building a savings account on the side. That would be at 3.50% (before tax). Not sure if this is the best way..This would be the wrong way
Or put the extra savings against the off set account. This would be the right wayBut that would reduce my tax return - It s negatively geared of course This is dumb. You sound like you want to lose money and get a little bit back on tax, rather than save money and pay no tax
How do you guys do this usually?
It s an investment property currently valued at $520 - $550 on which I have $500k of loan, 100% variable. $455 rent per week. High strata.


Others can comment on the merits of the rest of the strategy. I'm too tired lol. Need sleep.

Grogounet

  • Bristles
  • ***
  • Posts: 264
  • Location: Australia
    • http://www.quest2independence.com
Re: Aussie advice
« Reply #2 on: March 07, 2016, 10:25:16 AM »
Thanks Marty, not the first time I've seen you responding on questions and I like your insights.

Why would it be the wrong way? I have haven't made the calculation but I guess it would be good to compare with tax return if I am better off but putting money aside it a different bank account?

potm

  • Pencil Stache
  • ****
  • Posts: 555
Re: Aussie advice
« Reply #3 on: March 07, 2016, 03:30:59 PM »
Saving's account gets you a 3.5% return which gets taxed.
Mortgage offset gets you a return at the rate of your mortgage interest and also effectively taxed as you lose the interest deduction. No brainer, put it in the mortgage offset.
If you want to sacrifice money to reduce your tax, donate it to chairty instead.

gorey

  • 5 O'Clock Shadow
  • *
  • Posts: 3
  • Age: 50
Re: Aussie advice
« Reply #4 on: March 07, 2016, 07:02:54 PM »
P.


Sent from my iPhone using Tapatalk

Grogounet

  • Bristles
  • ***
  • Posts: 264
  • Location: Australia
    • http://www.quest2independence.com
Re: Aussie advice
« Reply #5 on: March 07, 2016, 10:42:28 PM »
Thanks Both,
I already donate to charity, however, it is also a nice idea to give more, I like it.

Sorry to be a pain, however, the calculations I have just don't match
If I put $10000 a year at 3.5%, taxed at 37%, that means you would pocket $220 per year
If I do put the same amount against a loan of $500 000 at 4.65% on the offset, you would pocket only $172
(you would deduct from your income only the interest then against 490 000 at 4.65%). This property is negatively geared. Same assumptions (37% tax rate)

Unless my calculation is wrong, you re better off putting it on a savings account?

potm

  • Pencil Stache
  • ****
  • Posts: 555
Re: Aussie advice
« Reply #6 on: March 07, 2016, 11:46:38 PM »
The $172 you are calculating is the benefit you get from the tax deduction.
You pay $465 more interest if you put it in the savings account instead of the offset. You then get back $172 back through the tax deduction so net result is $293.
That is more then the $220 net result for the savings account.


Grogounet

  • Bristles
  • ***
  • Posts: 264
  • Location: Australia
    • http://www.quest2independence.com
Re: Aussie advice
« Reply #7 on: March 08, 2016, 08:37:52 AM »
Thanks Potm,
Really appreciate your help there. I now know what I need to do then !

I would be interested to see what the guys are saying for the rest of the plan...