Using super to pay off LOC

[malcomb]

Hi all, I'd appreciate some advice on my situation:

We own our PPOR(value $450k), and have an IP (valued at $400k). IP is subject to an IO loan.
LOC is currently set at $120k, with $80k owing on the LOC, ie $40k buffer.

This year I can claim my super, which is a measly $90k.
I'm still working, earning $90k pa gross and happy to keep doing so for another 5 years.

Bank seems to be reluctant to loan any more money due to servacibility.

I was thinking I would take out the super, reducing the balance owing on the LOC, and purchase another IP.

What do learned colleagues think of that as a plan of action. Appreciate your thoughts.

 

[Peter_Tersteeg]

If you reduce the LOC then borrowing money to purchase another property, you're really just swapping one loan for another.

Getting rid of the LOC does increase your serviceability but it reduces your cash base for the next purchase. Has the bank (or yourself) taken into account that you'd need a smaller loan for the IP given your impending super payout?

You may be a good candidate to implement a transition to retirement strategy, but you do need some money in super to acheive this. You should discuss these types of options with a financial planner as this could have a substantial boost to your post retirement asset base.

 

[marg4000]

You cannot claim your super unless you resign from a job.
Marg

 

[Sheryn]

Malcomb

What did you buy with the LOC? Was it the deposit to purchase the IP?


Cheers
Sheryn

 

[malcomb]

Correct - deposit from LOC was used to purchase the IP.

 

[malcomb]

You cannot claim your super unless you resign from a job.
Marg

Unless you are over 65, I understand.

 

[geoffw]

You cannot claim your super unless you resign from a job.
Marg

You used to be able to do that but not any more.

I resigned from a job in 1987 and used the money for a trip to Mexico for a lady I was very keen on. We married in 1989.

Financially reckless both spending my super and getting married.

But it was well worth it.

 

[malcomb]

You used to be able to do that but not any more.

I resigned from a job in 1987 and used the money for a trip to Mexico for a lady I was very keen on. We married in 1989.

Financially reckless both spending my super and getting married.

But it was well worth it.

Sounds like you're recklesssness has led you to greater riches than any of us.

 

[Ian (WA)]

'Evening All,

Not sure about the 65 yrs old being cast in stone......I thought so long as you are over 55 when you retire from your "job" you can sign a stat dec to say you will not be re-entering the workforce again.

This used to be allowed but i'm not sure with super rules these days.

For the Fed Govt. to be drawing a line in the sand at 65yrs has knobs on it; I'd be asking a few questions of a decent accountant before consigning myself to an extra term of hard labour with my current "PAYG provider".

Cheers!

Ian.

 

[Sheryn]

Correct - deposit from LOC was used to purchase the IP.

Personally if it were me I would not pay of LOC as this will increase the tax you pay each year.

In regard to super I would add to super via salary sacrificing and build super up as super is tax free after 60 years of age.


Regards
Sheryn

 

[Sunfish]

Not sure about the 65 yrs old being cast in stone......I thought so long as you are over 55 when you retire from your "job" you can sign a stat dec to say you will not be re-entering the workforce again.

So your bank is happy to lend to a second -ve geared IP on a nod and a wink?

Mine is reluctant to write a new loan on a reduced int rate because I may not be able to pat it.

 

[Ian (WA)]

Nah, no such luck Sunfish.

What I was referencing was when I saw a financial planner a 12 years back, I asked about the 55 vs 65 retirement thing and he indicated back then that so long as I had clearly 'resigned' from my PAYG job and signed a stat dec to state that I would not re-enter the work force, I would be able to access some of my super funds.

I don't know if this can still be done, or if indeed it was possible 12 yrs ago....but I know it looked bloody appealing to me atthe time!!

Cheers!