Tax strategies towards end of FY

[mgs4]

A few tax strategies I've seen towards the end of FY including paying interest in advance for a mortgage or for say a margin loan on shares. If this is paid late June it allows for a larger tax deduction offsetting tax payable in a few months. Has anyone looked at this or things similar and found it be beneficial?

Cheers.

 

[Terry_w]

But then you have to consider the following year - no interest to deduct so how will that effect you. You could redo again, but then you are locked in.

Also the loan must be fixed to pay in advance, so restrictions on moving, selling, rates dropping again etc

 

[mgs4]

But then you have to consider the following year - no interest to deduct so how will that effect you. You could redo again, but then you are locked in.

Also the loan must be fixed to pay in advance, so restrictions on moving, selling, rates dropping again etc

Is there any reason you can't prepay a variable loan?

 

[Terry_w]

Is there any reason you can't prepay a variable loan?

Yes -because it is variable!

How do you know what the interest will be?

 

[Paul@PFI]

Prepayment of expenses is broader than just interest. Interest is generally the larger of all outgoings. Council rates, insurance, even considering the timing of repairs so that inevitable (deductible) repairs are bought forward.

On the interest side of things some banks allow less than a year prepaid. I have seen people choose 6 months. And as Terry says once you strat with prepaid interest you have to continue or the next year you have no deduction. This strategy can work well if a windfall year of income occurs (ie CGT) to spread the load over two years.

Then there is a refinance. Refinancing a loan taken out in the last 5 years should have a residual deduction available. For example taken out 2 yr ago still 3 years of the five to be claimed. Refinance allows this to be claimed. Now lets think LMI. If the original loan 2yr ago had LMI and a refinance can occur without there could be a benefit in refinance that gives a nice deduction.

Asset obsolescence should also be considered. The residual value on the QS report can be claimed if the asset is replaced (and the new one commences depn).

One of the ways you can benefit is also often overlooked. A PAYG Variation to reduce employer PAYG on salary may be a far more effective way of bringing fwd tax savings to cashflow.