ideas for tax money

[Andrew]

Being a contractor, I get paid a gross figure for the work
I do and stick 10% into an account for the GST man and
around 31.5% into another account for the ATO man.

The thing is I am accumulating cash quickly which isn't
working very hard and I don't have to hand it over until
at least November 2004.

Any ideas what I can do with this other than stick it into
a high yielding bank account. Obviously I would want
something with low risk (don't we all) as it's not really
my money.

The money involved is about $700 pw. So it's not huge
but it is burning a hole in my pocket.

andy

 

[Peter_Tersteeg]

Why not put it all in an offset account against one of your IPs? This will increase your cashflow and you'll still have the money there when you need to pay it. The interest it offsets will also still be tax deductable after you've paid your tax.

$700 per week will be a substantial amount at the end of the year. You'll probably save yourself about $1000 in interest for the year.

 

[Simon]

Heres a better idea.

Put it in my offset account!

 

[Andrew]

Problem with offset is my loans are fixed and only
attract 40% offset. With hindsight I would have left
some portion variable but I'm not that smart (to
see into the future that is.)

Fixed at 5.99 (call it 6%) X .4 = 2.4%.

Double 2.4% because this is untaxed (saving interest
instead of paying interest) and I'd have to achieve 4.8%
to beat this, which is doable with ING, etc.

So for me putting the money in offset will only serve
to earn the same as a high interest account like ING.

Keep 'em coming though.

andy

 

[Kevmeister]

Buy yourself a PPOR, and get an offset account on that loan, and apply it to that...

 

[Andrew]

Uhmm, my PPOR is one of the fixed loans, besides I firmly
believe that now is the exact wrong time to be buying
property.

Now before I get toasted by those of you who have found
a 10% yielding property 2 hours drive from Alice Springs,
what I'm saying is that now is the wrong time to be buying
the types of properties that I'm looking to accumulate.

andy

 

[Peter_Tersteeg]

Here's a speculative idea:

Use the money to invest in something which has a shorter exit period. Trading shares may be an option, or a fund like Steve Navras.

If you make money, great. If you loose money, you've made a loss which is claimable on your tax. How much this affects your bottom line is dependant on your circumstances.

Like you've already indicated, it'd want to do better than what ING can do.

If this isn't for you, then a 40% offset is better than nothing, but I really think you should drop it into my offset account, not Simons, because I thought of it first

 

[paul_s]

Well I guess the question is how much risk do you want to take on the money?, it sounds like you might want a close to zero risk investment in which case you're talking term deposits/cash management trusts etc around that 4-5% range. Anything with likely higher returns is going to mean more risk.

 

[DaleGG]

Hi Andrew

Some solicitors have interesting products and one in Dandenong & the City have an interest bearing account (at call) earning about 8% last time I checked.

They have been doing this for about 40 years and I know of a few very, very cautious people who have taken advantage of this.

Perhaps you could talk to your solicitor about this . . . .

Dale

 

[peteb]

does that mean you wont be paying your GST and TAX bill until november next year ?

 

[Andrew]

GST is supposed to be paid quarterly
but I won't be paying my income tax
until November next year.

andy

 

[D.T.]

Hi Andrew

Why dont you save up say 180k or so of these funds and mortgage them to me at say 7.5%?

-Hehe

Dave