Hi all, I need your perspective/advice.
My parents have recently sold the family home (overseas) and will be moving to a smaller house for their retirement. My dad is sending me an amount of money from selling the house as (he said) heritage gift for me and wife.
The fund will be just enough to pay off our PPR mortgage. But I thought it would be better off parking the fund on the offset account. I suppose for better accessibility of the fund.Since we have mortgage, I though placing it in term deposit or managed fund won't give any benefit.
My concern is that having all money in one offset account can be risky. Any thoughts or perhaps better ways in investing the fund?
The other question is tax in relation to receiving the money from overseas. Will this be any concerns? This is more a question for accountant, but may be someone here has past experience.
Thanks a lot in advance.
There is no Tax on gifts so that is out.
If you intend to stay in your current property forever and a day then pay down the principal but if there is a slight chance you may 1 day move to a bigger property and rent out the current property and utilise an offset account.
Careful planning today will serve you well in the future.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Wow! Lucky you!
This has put you in such a great position.
Be careful because I have seen people receive huge large sums of money that they said they were going to save and they have dwindled it away. If you don't want to buy an investment property then it might be an idea to just pay off your loan with the bank. Having it in the offset account could be a huge temptation to spend it when you want a new gadget or new clothes or a new car. If it is paid off the loan it is harder to withdraw it. Plus how awesome would it be to have your home fully paid off???
If you have survived without the money until now you there is a good chance could survive without it in the future.
If you think of it like that then it may be an idea to look at investing in property. Investing in property that generates a good cash flow could end up giving you extra 'spendable' money in your pocket each week and could set you up for life. If you have to get a small loan on the investment property then let the rent pay back to mortgage so you never have to pay it. Then when it is paid off you might even want to think about buying another investment property.
Be very careful and very wise. This heritage gift could set you up for life, so be smart with it and get good advice.
Ryan McLean | On Property
http://onproperty.com.au
Email MeThanks Richard and Ryan for your inputs. Really appreciate the advices.
I really want to give something back to my parents in return. Perhaps reserving the interest money I am now paying to bank in a term deposit or something cash. Then I can start supporting (sending some money back) them during their full retirement time.
I'm also very keen in doing property investment. At the moment, I have 1 IP negatively geared (around $500 extra a month).
I would need some advice from you as well on how best I should structure the mortgage. Negatively geared property seems to create a limit.Thanks again.
there are some risks with both options outlined above.
As Richard points out, if you ever intend to move to another house when the family gets older, an offset leaves you with access to the money without a new mortgage and the ability to negatively gear your current house, you can’t do that if you pay out the loan & reborrow. You could then apply some of the ‘saved’ interest components to the other property.
If you can’t be trusted with the money in an offset, pay out your loan and apply the money that you would have used on the ppor loan toward another property, lower risk but much slower @ growing your portfolio.
Option 3, put as much into your super & wife’s super this financial year & next, start your own smsf & start investing in a heavily tax advantaged system.
Hi Scott,
Thanks for advising option. I have no idea in doing smsf and how to use this vehicle in investing. It sounds great tax benefit from what you mentioned. I haven't done research on smsf. Any suggestion?
Cheers
plenty of information on this site but you would be best serviced by professional advisers.
Placing the money in an offset account is the only answer.
Definately do not pay down your mortgage. About three major reasons for not doing this. Risk, tax deductibility and extra costs on your future acquisitions.
No term deposit as this attracts tax,
You have many options, including but not restricted to SMSF gearing- particularly with internal loan arrangements that are available to you given the money parked in your offset account.
Thanks a lot guys for your views and recommendations.
At the moment, I will just park it in offset account reducing interest while doing some research and discussing with accountant and planner. Hopefully I can have all possible options for better decision.If say I don’t have to pay interest on PPR mortgage and I have some extra funds, will it be better if I park the extra money on IP offset account?
My situation:
PPR value: $490k.
IP value: $400k. Loan $350k (7% IO – 100% offset). Rent $320pw. I have to pay roughly $750pcm out of pocket excluding rates etc. Say I have $50k sitting on offset account. It would bring out of pocket money down to around $500. Will this more tax effective?
Take home pay around $5400pcm + $2800pcm (from my wife).
No other loan. No kids (yet) – planning to have first baby next year.
Planning to buy another IP of around $300k perhaps towards end the year. If this is good to go ahead, what would be the best structure?Thanks heaps again. Glad that I know this forum.
Cheers
This all looks good, but make sure you borrow 110% for your next IP, this will ensure all is tax deductible in the event that you purchase a more expensive PPOR and or require the funds for private use. Again, any extra money is to be placed in an offset account. Utilise split loan accounts for various strategies…..
Note: Utilise the equity in your PPOR for this set-up…… have fun!
I would suggest you put the money in the offset account until you want to use it. If you want to invest with it you should then pay down your loan and reborrow the money so the intereest in deductible.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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