prepaying next years loan interests
- Thread starter eggnog
- Start date
Yes... but don't just dump funds into the loan account. It must be arranged with your bank. I usually start this process about mid May and that gives the bank time to get the documentation sent to you, signed and returned in plenty of time to stuff it up... I mean in plenty of time to get things organised 
.
It means locking into a fixed rate too, so be aware of this and don't lock in too long if you have plans of selling or you will be faced with penalties if you want to get out of the locked in rate.
.It means locking into a fixed rate too, so be aware of this and don't lock in too long if you have plans of selling or you will be faced with penalties if you want to get out of the locked in rate.
Also have a chat to your accountant to confirm that this is the most efficient way of lowering your tax.
dont think a one year interest in advance rate is much of a rate risk issue unless we have a major tumble around the corner
ta
rolf
Agree with Rolf. One year isn't much of a risk. Other things you can prepay are rates, water. You could change the date your IP insurance is payable to June. Bring forward any maintenance or repairs. But interest is the biggest way because it is a much bigger amount than those other items.
Good point Rolf. Could lock in only for 1 year then pay all next years interest upfront.
Wylie, already have changed insurance to fall in June. But didn't know about council rates or water. How do you go about asking for next years fees? I find it hard to believe as it is all tied in with how much water you physically use and what the annual unimproved site val is which wont be determined until they fall due next year.
Wylie, already have changed insurance to fall in June. But didn't know about council rates or water. How do you go about asking for next years fees? I find it hard to believe as it is all tied in with how much water you physically use and what the annual unimproved site val is which wont be determined until they fall due next year.
You could salary sacrifice to super.This would lock the money up till retirement. But if you're nearing retirement age then it's not such a big deal.
If you donate to charity, you could bring forward next year's donations.
If you want a holiday and your employer is agreeable you could take unpaid leave. You may even be able to negotiate unpaid leave this financial year and cash out the paid leave next FY.
If you donate to charity, you could bring forward next year's donations.
If you want a holiday and your employer is agreeable you could take unpaid leave. You may even be able to negotiate unpaid leave this financial year and cash out the paid leave next FY.
Wylie, thanks. I come off a fixed mortgage soon and will be selling (hopefully!) in FY16, contract note after 30 June. My understanding of prepayment was as you described, but I was not sure. No matter - the SVR is lower. I'll pre-pay other things.
Prepaying loan interest may be a good way to shift deductions BUT it comes at a cost. In the following year if you don't repeat the process your interest deduction may be zero and so the benefit in year one is reversed in year two and you get a belated tax bill + PAYG instalments etc.
Personal tax advice is a must.
1. What is the projected value of the CGT . Its often less than expected. Client calculations can be over and under estimated. Both are a concern.
2. What other strategies are available ? ie : Age, deductible super contributions. Can income be deferred ??
3. What is the impact on other taxes ?? ie 30% tax on super contributions may occur ?
4. Do you have pte health insurance ?? A surcharge could occur.
Personal tax advice is a must.
1. What is the projected value of the CGT . Its often less than expected. Client calculations can be over and under estimated. Both are a concern.
2. What other strategies are available ? ie : Age, deductible super contributions. Can income be deferred ??
3. What is the impact on other taxes ?? ie 30% tax on super contributions may occur ?
4. Do you have pte health insurance ?? A surcharge could occur.
All this is true and problems we have faced. We initially prepaid in a year that we made a gain. We've been prepaying ever since, but luckily for us we have several loans and can prepay some without losing the next year's interest deductions completely (if that makes sense).
So, I liken it to cutting down on something. We can taper off. If we had just one big loan, we would be faced with a big problem when we stop prepaying.
