Hi all,
For someone who has NO non-deductible loan:
Question 1: can someone please tell me which of the following point is correct or it depends on individual circumstances?
* offset for IP loan is futile
* offset for IP loan - interest saved is still greater than potential tax benefit
I've run the following calculations:
Assumptions, simplified for the sake:
Salary: $80k pa
Tax rate: 34%
IP loan with offset: $300k @5%
Scenario 1: if spare cash of $60k in offset
Loan interest payable: $300k-60k=$240k @5%=$12000.
Tax payable: $(80000-12000) x 34% = $23120.
Total 'outgoing' for the year: $23120+12000=35120. (And annual fee of $3XX of having the offset acct)
Scenario 2: if spare cash of $60k in TD at 4%
TD interest: $60k @ 4% = $2400
Loan interest payable: $300k @ 5% = $15000
Tax payable: $(80000+2400-15000) x 34% = $22916
Total 'outgoing' for the year: $15000+22916-2400=35516.
Question 2: so then if it really makes minimal difference, where should one place the savings?
Sorry if they are silly questions. Thanks in advance!
For someone who has NO non-deductible loan:
Question 1: can someone please tell me which of the following point is correct or it depends on individual circumstances?
* offset for IP loan is futile
* offset for IP loan - interest saved is still greater than potential tax benefit
I've run the following calculations:
Assumptions, simplified for the sake:
Salary: $80k pa
Tax rate: 34%
IP loan with offset: $300k @5%
Scenario 1: if spare cash of $60k in offset
Loan interest payable: $300k-60k=$240k @5%=$12000.
Tax payable: $(80000-12000) x 34% = $23120.
Total 'outgoing' for the year: $23120+12000=35120. (And annual fee of $3XX of having the offset acct)
Scenario 2: if spare cash of $60k in TD at 4%
TD interest: $60k @ 4% = $2400
Loan interest payable: $300k @ 5% = $15000
Tax payable: $(80000+2400-15000) x 34% = $22916
Total 'outgoing' for the year: $15000+22916-2400=35516.
Question 2: so then if it really makes minimal difference, where should one place the savings?
Sorry if they are silly questions. Thanks in advance!