Can someone help me with the maths of whether I'm better off putting my HECS debt into an Investment Loan and claiming the extra Interest+depreciation?
Scenario (numbers approx/rounded):
HECS Debt: $35000
Repayments: $800pmInv Loan: $350,000 (current), $385,000 (with hecs)
Use Interest 7%paObviously cash flow will be better but what is the 'cost' of repaying it?
Incl. tax benefits etc.
Unfortunately your HECS debt is not tax deductible nor classed as an investment for the purpose of increasing the debt on your IP. If you roll your HECS debt into your IP loan, the interest on this portion will remain as unclaimable. The HECS debt is adjusted by CPI which is alot less than your rate of interest (moreso depending upon your marginal rate of tax).
For the purposes of this exercise, let's assume that the additional credit on the investment loan is for "renovation" purposes.
So your going to take more out on your IP as a "reno" expense to pay down your HECS debt so you can continue claiming interest on the "reno" expense … then you wonder why we pay high taxes in this country.
you could be lucky enough not to suffer a tax audit but then again you could. Is a spell for fraud seriously worth the risk?
The money would go towards "reno" as I will use savings to repay HECS but have an increase in the offset account for "emergency" purposes, that's all.
Just need to get something straight – do you intend using funds which are in an offset or other account to pay off your hecs debt (perfectly fine) or increase your debt on an ip to pay off the hecs debt (which would still remain non-deductible no matter how you package it)?
I like having funds available "just in case"
So I would use my savings to pay off hecs but increase my IP offset account by approximately the same amount so I have access to this money – even though I may not use it immediately.
Does that make sense?
if you want funds available for ‘justin’, it might be best achieved by a loc.
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