Live out of capital
- Thread starter Allan
- Start date
Hi Alan,
Sounds a lot like buying an anuity with borrowed funds financed against an asset (property).
Your capital will be payed to you by the organisation you buy the annuity from.
The capital is classed as capital thus you don't pay tax on it.
Note : This is my take on what you asked.
Happy Investing
Sounds a lot like buying an anuity with borrowed funds financed against an asset (property).
Your capital will be payed to you by the organisation you buy the annuity from.
The capital is classed as capital thus you don't pay tax on it.
Note : This is my take on what you asked.
Happy Investing
Hi Allan
It is when you borrow money from the banks and use those funds to enjoy a lifestyle without paying tax.
Because the money is borrowed, it is not classed as income and hence the tax free status of it.
However, the trap is that your debt level is rising each year and you must be personally comfortable with this notion, and, find a banking source that will be comfortable with you doing so.
Obviously, you need to have a reasonable level of assets to be able to do this.
Dale
It is when you borrow money from the banks and use those funds to enjoy a lifestyle without paying tax.
Because the money is borrowed, it is not classed as income and hence the tax free status of it.
However, the trap is that your debt level is rising each year and you must be personally comfortable with this notion, and, find a banking source that will be comfortable with you doing so.
Obviously, you need to have a reasonable level of assets to be able to do this.
Dale
Alan,
Note that a similar strategy is to borrow funds from your equity & use them to buy an annuity which then provides your income.
This has the same advantages/disadvantages as the strategy described by Dale, but can be used as serviceable income for further borrowings.
This gets around the issue of not being able to service further borrowings as may occur if you are living purely off borrowings.
The interest on the annuity is the only part that is taxable.
Remember that you do have to pay back those loans somehow during their life however - your payments could significantly cut into the income you receive from the loans.
Cheers,
Aceyducey
Note that a similar strategy is to borrow funds from your equity & use them to buy an annuity which then provides your income.
This has the same advantages/disadvantages as the strategy described by Dale, but can be used as serviceable income for further borrowings.
This gets around the issue of not being able to service further borrowings as may occur if you are living purely off borrowings.
The interest on the annuity is the only part that is taxable.
Remember that you do have to pay back those loans somehow during their life however - your payments could significantly cut into the income you receive from the loans.
Cheers,
Aceyducey
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