Prepaying interest to increase expenses this FY

Guys, This FY I worked in a sales role and also had a couple investment properties under my belt. My bonus component was $30k and considering prepaying interest to help offset this. How do I get a rough guide on how much to prepay. My investment debt is around $1.6M but are spread out amongst a variety of loans etc...
 
Guessing an accountant can answer this better than myself but if you are in a hurry for a response, my thoughts are below.

If the question how do you minimise your tax bill with the $30k bonus?

Prepaying your interest brings forward an expense. This results in you having to prepay your interest every year moving forward as if you don't prepay next year then you won't have any interest to expense against your income leading to a larger tax bill in that year.

However, prepaying is a good idea if you are expecting a lower or no income next year. This is because your marginal tax rate is higher this current year than next year, so it's better to bring forward the interest expesnse.

If your question is how much of the $30k you should use for prepayment? That would depend on what else you could use the $30k for. Leaving tax considerations of bringing forward the expense, you can leave it in an offset account to decrease your interest whilst giving you the flexibility to us the money when you need to on whatever you want.

Other way I read your question is how much of your loan should you fix for 1 year in order to prepay the interest. That calculation would be roughly

Loan amount to prepay = $30k / interest rate
 
well my income was $30k higher in this FY, and moving forward for the next few years I cannot see my salary getting that much higher.... hence why i want to prepay some itnerest tooffset the higher income this year...
 
If all you want to do is to wipe out $30k of income then you would just calculate it like this

$30k / 4% = $750,000

So if you fixed $750,000 for 1 year and paid the interest upfront at 4% you would pay $30,000 in interest.
 
Guys, This FY I worked in a sales role and also had a couple investment properties under my belt. My bonus component was $30k and considering prepaying interest to help offset this. How do I get a rough guide on how much to prepay. My investment debt is around $1.6M but are spread out amongst a variety of loans etc...

This is our position too, large loans but split between about seven loans.

We first prepaid interest when we sold a house a couple of years ago and made a capital gain. Since then, we continue to prepay enough interest to minimise our tax, and because we, like you, have a variety of loans, we don't have to prepay "all or nothing".

About this time each year, I work out what our incomes are so far, project forward what the full financial year's income will be, and prepay to suit.
 
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