Better money / IP mgmt

[Chromium]

Folks,

Seeking some advice on better way to manage money / investments..

Situation :
PPOR worth about 420K. Owing 270K plus additional 63K LOC which was used to buy IP. IP bought with 260K loan and the LOC of 63K. Costs 10K/annum out of pocket to hold.

Cash savings of 24K sitting in a savings max account giving 7 / 8 % interest.

Income: Reasonably high income above 80K/annum. Wife back into studies right now but would go back to workforce in May 2009. When she does she would earn above 50K. 2 kids under 6…so some CCB…but is kept aside for rainy days.

My queries:

1. Wife says we should close savings max acct and put 24K back into 63K LOC. She says thereby we reduce our interest burden but then that reduces our deductability too. …Does’nt it ?

2. How do I get max tax advantage ?

3. Can you suggest any other better way to manage all the above ?

4. I am quite keen on moving on to next IP if possible. Would Rolf Latham be interested in working out his magic in above situation ?

 

[yo yo ma]

1. Wife says we should close savings max acct and put 24K back into 63K LOC. She says thereby we reduce our interest burden but then that reduces our deductability too. …Does’nt it ?

2. How do I get max tax advantage ?

3. Can you suggest any other better way to manage all the above ?

4. I am quite keen on moving on to next IP if possible. Would Rolf Latham be interested in working out his magic in above situation ?

1. Yes close the savings max account but don't put back into LOC... Put into an offset account against your PPoR rather than the IP for maximum tax savings.

2. You are paying tax on the interest earnt in the savings max account... you pay no tax if in the offset account.

3. As above

4. I'm not Rolf so can't answer that

 

[tubs]

If cashflow is really important, then the $24k outside the offset is better, because at least you'll receive physical interest (although not that much once you pay tax on it). Putting it into the offset against your PPOR will help get that loan down faster, but you probably wont get much interest.

Mind you, if there's a high interest account you can use as an offset even better.