Proceeds from Sale

[womble66]

We have just sold our PPOR and will be renting for up to 12 mths so need the most tax efficient way to save the proceeds in the interim until we buy our new PPOR.

$300K from Sale in cash.
$390K IO loan with 100% offset at 5.99%.
$100K in Term Deposit at ~5.00% as security for IO loan (temp as was x-coll and was cash in offset)
IP in my single name with income of ~$75Kpa
Partner on income ~$30Kpa
IO loan in both names

No credit cards or other loans.

Just unsure whether I should:

1) put proceeds into IO offset and pay minmal interest and pay tax on increased income less expenses at my tax rate?

OR

2) put proceeds into wifes name in high interest account and just pay tax at her tax rate and claim full interest on IO loan at my tax rate etc.

Sorry if it confusing or if its a question that cannot be answered with the info supplied.

Cheers for any advice offered

 

[Terry_w]

If you put $300,000 into the offset account on the IP it will result in 5.99% x $300,000 pa in interest savings. So it will result in an increased taxable income for the owners of this property for that amount ie about $17,970 pa.

Now work out the tax the owners would pay.

Compare this to investing in the wife's name and how much tax she would pay.

Or, gift the money to a discretionary trust and have it invest the money. Extra asset protection and tax benefits of streaming and flexibility.

 

[womble66]

Thanks Terry.

I just didn't know if I needed to consider any other components other than the pure interest earned by each option vs the marginal tax rates of each of us.

Hope she doesn't do a runner with the cash.........lol.

Cash will be used as a deposit for my next PPOR with the excess deposited in another 100% offset against this loan to reduce interest paid on the non-deductible debt.

As my next purchase is going to my PPOR I don't think a discretionary trust can buy my PPOR and will not be doing another IP until equity has increase in my current IP.

Cheers.

 

[Jake D]

Can drop it in my offset account if you want. it won't cost you anything in tax. Let me know.

 

[womble66]

what the cash or my wife????

 

[Jake D]

The cash, I already have too much wife considering my financial situation.

 

[matto_]

nice situation to be in - trying to work out best place to store excess funds......

 

[womble66]

Its only temp for 6 mths until the wife finds a new house or we build and then I will need to sign up for more debt.

Never rented but thats the plan in a few weeks so we can be in a strong position to buy when we find the ideal house. Worse case now will be that we may need to break the lease if that occurs and as rentals are in high demand the break costs should be minimal and far less pressure or costs than buying before I sold.

 

[Terry_w]

As my next purchase is going to my PPOR I don't think a discretionary trust can buy my PPOR and will not be doing another IP until equity has increase in my current IP.

Cheers.

A main residence can be owned in a discretionary trust - with a few issues to consider. However, this is not what I was suggesting.

There are a few tax and asset protection strategies you could implement.