All Topics / Help Needed! / A spare 20k

Viewing 17 posts - 1 through 17 (of 17 total)
  • Profile photo of MillyMilly
    Member
    @milly
    Join Date: 2004
    Post Count: 288

    I have just discovered that I am lucky enough to be able to cash in about 20k of my super. Not exactly sure why but it’s described as unrestricted and non-preserved. Perhaps it came about when I gave up work to have babies.

    Anyways I am tossing up what to do with the money. I could put in on my PPOR loan. I owe about 30k there.

    Or I could use it for a deposit on an investment house.

    Or I could leave it where it in the super fund.

    Or I could blow it on some of those nice luxuries we never seem to afford. Holiday involving no tents would be nice.

    My situation is: widowed, 4 kids under 12, work casually as a supply teacher and part pension.

    Any advise on what YOU would do is greatly appreaciated.

    Milly

    Profile photo of hmackayhmackay
    Participant
    @hmackay
    Join Date: 2004
    Post Count: 197

    Lucky you,

    You.ve nominated some excellent choices.

    I would put it to my PPoR loan, or you could have a great holiday (non-tents)(non-kids), or I have a great tip for the horses tomorrow.here’s my BSB and Acc No.123 454 898982.

    Regards[biggrin]

    hrm

    Profile photo of wilandelwilandel
    Member
    @wilandel
    Join Date: 2003
    Post Count: 761

    Hi Milly,

    I would definitely pay it ALL off on my PPOR loan. In your situation with 4 kids, I think you would prefer to feel like you have little or no real personal debts.

    Don’t drop your repayments, and the other $10K you owe will disappear quickly.

    Good luck, [biggrin]
    Del

    http://www.nzpropertytogo.com

    Profile photo of LuciLuci
    Member
    @luci
    Join Date: 2005
    Post Count: 114

    Put it in your PPOR to pay off your “bad” debt (non tax deductible), and you can leverage off the equity in your PPOR to get an IP (debt which is tax deductible).

    Profile photo of Mortgage HunterMortgage Hunter
    Participant
    @mortgage-hunter
    Join Date: 2003
    Post Count: 3,781

    Research how it will benefit you where it is.

    If you draw it I would use it in the PPOR as suggested. You can always create new deductible debt for more IP’s.

    Cheers,

    Simon Macks
    Finance Broker
    [email protected]
    0425 228 985

    Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

    Profile photo of andrew8andrew8
    Participant
    @andrew8
    Join Date: 2002
    Post Count: 21

    Most superannuation accounts are not known for good returns.

    If your house loan allows an offset account (where any balance reduces the interest on your home loan), I’d put it in there (so it is available for investement).

    If it doesn’t allow an offset aco<edited> and your house loan allows you to redraw, I’d pay it into the loan account.

    If neither, you have to consider how likely it is you want to use that money for investment.

    Keep in mind that (if you are paying income tax) your investment return must be more than your home loan interest rate before it is worthwhile to invest the money rather than pay off your home loan. The amount depends upon your marginal tax rate.

    Andrew

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Putting it into an offset account so it can be redrawn for investments may not be the best way to proceed.

    What happens when the money is taken from the offset and invested? The interest on your home loan increase – non deductible.

    If you pay into your home loan and withdraw for investment, the net interest will be the same, but the interest will now be tax deductible.

    Terryw
    Discover Home Loans
    North Sydney
    [email protected]

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of Robbie BRobbie B
    Member
    @robbie-b
    Join Date: 2004
    Post Count: 2,493

    The idea behind putting the money in the offset is to offer a good return on this money. If investment is intended, the idea is to obtain another interest only loan against the available equity in the property and use that. The cash would still be sitting in offset for a rainy day.

    Also, leaving it in your offset would mean your deductions can be increased if you change your PPOR. Unless you can get a return better than the tax free benefit of leaving the funds in your offset account, I would put it there.

    The Mortgage Adviser


    http://www.themortgageadviser.com.au
    [email protected]
    Essential Links


    Profile photo of Don NicolussiDon Nicolussi
    Participant
    @don
    Join Date: 2005
    Post Count: 1,086
    If you pay into your home loan and withdraw for investment, the net interest will be the same, but the interest will now be tax deductible.

    Got to agree with Terry. This is the way we have done it in the past.

    Good Luck

    Don Nicolussi | Mortgage Broker - Home Loan Warehouse
    http://homeloanwarehouse.com.au
    Email Me | Phone Me

    "I think of finance as a technology, a way of getting things done." Robert Shiller

    Profile photo of Robbie BRobbie B
    Member
    @robbie-b
    Join Date: 2004
    Post Count: 2,493

    Don, it seems that you do your own loans from many of your posts. If you used a good broker, they would tell you that putting money into your non-deductible loan and then drawing it out later for investments when you still have non-deductible debt mixes up your deductible and non-deductible debt. This will potentially cause you headaches at tax time especially if you incorrectly calculate what portion is deductible and which isn’t. It gets worse if you get audited and get found out.

    It is said that the ATO will consider payments into a mixed loan like this as spreading equally across all portions. That means you would be considered to be making principal and interest payments on your deductible debt and taking longer to repay your non-deductible debt.

    I didn’t suggest leaving the money in the offset and drawing down a seperate loan from the available equity to use for investment without good reason.

    The Mortgage Adviser


    http://www.themortgageadviser.com.au
    [email protected]
    Essential Links


    Profile photo of Don NicolussiDon Nicolussi
    Participant
    @don
    Join Date: 2005
    Post Count: 1,086

    Hi, Not to much of a hassell to calculate a deductible portion of a mortgage. That was a while ago now. Currently we do not have any non deductible debt.

    Cheers

    Don Nicolussi | Mortgage Broker - Home Loan Warehouse
    http://homeloanwarehouse.com.au
    Email Me | Phone Me

    "I think of finance as a technology, a way of getting things done." Robert Shiller

    Profile photo of WylieWylie
    Member
    @wylie
    Join Date: 2004
    Post Count: 346

    Hi Milly,

    To give a different perspective, here goes.

    We have always had IPs and while others think we are “lucky”, it has meant hard work and either no holidays or, at best, pretty average holidays. We have all our “needs” met and a fair amount of “wants” as well. Life is good. I’ve chosen not to work since our second baby and that is a lifestyle choice. I want to be home for the kids and we have worked and saved hard enough pre kids to enable this. Sure, if I worked we’d have much more to spend, but I like life like this.

    My point is that recently we busted our butts helping my parents gut a kitchen and bathroom, repaint inside, landscape etc etc a long term rental they wanted to sell. We all put in several weeks of 12 hour days (including my boys). My parents paid us and we put the funds into our housing loan.

    I then had a breast cancer scare, which turned out to be benign, but it did make me stop and think. My kids are 16, 13 and 9 and we’ve never had an expensive holiday. Because we’ve never had “spare” money before, we have decided to take a Disney holiday. Therefore, we’ll redraw the money from the housing loan and do it.

    Our 16 year old may not want to go on holidays with us for too much longer – it is a holiday they’ll never forget and the housing loan will still be there when we get back.

    My point is that sometimes, despite knowing what you “should” do with a windfall, you just have to go the other way. I have struggled with my desire to reduce the housing loan and wanting to have one decent holiday.

    Obviously our situations are different, but perhaps you could put most of it into the housing loan and have a great holiday without tents.

    If my kids were younger than they are, we would probably not do the big holiday. It is only their ages and the fact that they may not want to come with us soon, that we have made this decision.

    Sorry to ramble. Hope this helps.

    Regards, Wylie.

    Profile photo of Don NicolussiDon Nicolussi
    Participant
    @don
    Join Date: 2005
    Post Count: 1,086

    Hi Rob,

    We use brokers all the time but sometimes the institutions with the best rates don’t use the brokers.

    Cheers.

    Don Nicolussi | Mortgage Broker - Home Loan Warehouse
    http://homeloanwarehouse.com.au
    Email Me | Phone Me

    "I think of finance as a technology, a way of getting things done." Robert Shiller

    Profile photo of BofclarkBofclark
    Participant
    @bofclark
    Join Date: 2005
    Post Count: 31

    Hi. Wylie gives a lot of food for thought. One thing that I realised early was that I had to make my decissions and live with the consequences of those decissions. Oddly enough I found it very easy to live with negative consequences if I had made the decission that brought them about.
    I know a man who all his working life said ” I’m working and investing hard so that I can retirer at 55 years of age”. 55 years came and went and he said just a bit more so I can feel secure about retirement. 65 came and went and he said just a bit more to make certain. 68 years came and at last he took a break and went on a trip around Australia with his wife. This was something he had looked foreward to doing all his working life. They were away for three months and returned home after a great trip. The wife awoke one morning, about a week after they had returned, and said ” I’m having trouble breathing this morning”. Trip to hospital, diagnoses cancer of the lung. Prognoses three months without treatment who knows with treatment. That was 18 months ago. True story. The point is that life is temporary and unlike money once spent you can not get it back or make some more.
    I invest because I enjoy it. I invest in order to hopefully make a difference. The idea of investing just to make money to my mind makes little to no sence. I know one day I will be no more. I live my life knowing that this life is temporary. When I get so old that death is likely I want to look back and know that I made the most of my life, I made a difference to someone. Milly you have to make the decission . To me investing is more about the journey ,the challenge and the enjoyment than it is about the money. Ask yourself why are you working/ investing? and what can you do to achieve your goals. What are your goals? and when you look back on your life will you be happy with the choice you made.

    Profile photo of MillyMilly
    Member
    @milly
    Join Date: 2004
    Post Count: 288

    thankyou all for your time and advice.

    Thankyou wylie and Bofclark in particular for your reminders of what is important in life. Just for the record tho, a holiday in a unit with four boys is NO holiday for me!!!! The thought of getting on a plane and taking them to disney land is enough to make me shudder wiht fear.

    We all respond differently when tragedy strikes. I am conscious of being hte bread winner and making sure our future is secure. I believe I am acting as my husb would want.

    when it comes to property investing tho, that is my hobby as well as securing my future. I have 2 IPs and love perusing realestate.com for good buys. I never go to a new town without looking in at the agents windows. I am with you entirely Bofclark when you say you enjoy the challenge, the chase more than any particular end. oh yes I admit i do not want to starve in my old age. But no amount of wealth would stop me from enjoying my bargain hunts at garage sales or ebay or markets. must be my scottish heritage [wink]

    milly

    Profile photo of ducksterduckster
    Participant
    @duckster
    Join Date: 2004
    Post Count: 1,674

    $20,000 at 7% interest is $1400 a year you could organise with the bank to reduce your repayments per year by through saving on your home loan interest. Another important factor is you are on a pension if you spend $1400 a year on a holiday from the interest savings that won’t be seen as income and the $20,000 paid off the loan won’t be seen as assets which can affect your pension payment. You can only spend the 20,000 once where as you can spend $1400 per year for however long the home loan has left in its repayment term.
    If interest rates increase in the future it will only be on $10000 rather than $30000 giving you some breathing room.

    Profile photo of ducksterduckster
    Participant
    @duckster
    Join Date: 2004
    Post Count: 1,674

    non preserved payments are the payments you made with after tax money. When you work and have payments made by your employer the money hasn’t been taxed so $1 earned equals $1 invested. At a tax rate of 20% $1 earned is 80 cents invested and 20% taxed.
    the unrestricted refers to non preserved payments prior to a law change in Jul 1999 where now any money invested stays in the super fund till retirement. I am not 100 percent sure on the date of jul 1999 it could have been jul 2000. There are so many law changes I would have to read up on them as 1984 was another year where major law changes occurred on the taxing of super payouts.

Viewing 17 posts - 1 through 17 (of 17 total)

You must be logged in to reply to this topic. If you don't have an account, you can register here.