Where to put extra funds?

I think I'm on the right track but hoping to have it confirmed. Situation:

1) PPOR with two IO loans, one for the PPOR and the other for my IP. PPOR loan has 100% offset

2) My IP has one IO loan, no offset. Biggest Loan

3) My wife has a IP with one P+I loan. Loan has 100% offset

I earn substantially more than my wife.

Just had second child so after just purchasing 2nd IP, not in the position to take another jump yet.


I have enough cash to cover for 1)'s PPOR loan...hence won't pay any non-deductible interest.

However, I also have some extra cash. I'm currently putting it into 3) my wife's 100% offset account.

My thinking is, eventhough I'm reducing her negative gearing (or maybe possibly making it become slightly positively geared), it's better than putting it into a term deposit or one of those ING or DragonSaver accounts, getting less interest rate and paying tax on returns.

I'm not risk inclined enough to put into shares though.

Thanks for your thoughts!
 
Why don't you have an offset on your IP loan ?

Is that intentional to maximise your negative gearing ?

If it is, why are you placing surplus into your wife's IP offset ?

Recommend you place additional funds into your PPOR offset and allow the best taxation position for you and your wife.
 
gday simon

yep, haven't taken out offset option with 2) IP loan offset to maximise negative gearing and not pay small extra monthly charge.

Placing surplus into wife's IP offset because if I was to put the the surplus into the IP offset (the IP loan in 1) below, also has 100% offset account), then I would be reducing the negative gearing against my income which is higher than hers.

I think I didn't convey myself well. I have already put enough funds in the PPOR offset account equalling the remaining balance. The reason for this thread is where to extra funds beyond this.
 
I think I'm on the right track but hoping to have it confirmed. Situation:

1) PPOR with two IO loans, one for the PPOR and the other for my IP. PPOR loan has 100% offset

2) My IP has one IO loan, no offset. Biggest Loan

3) My wife has a IP with one P+I loan. Loan has 100% offset

I earn substantially more than my wife.

Just had second child so after just purchasing 2nd IP, not in the position to take another jump yet.


I have enough cash to cover for 1)'s PPOR loan...hence won't pay any non-deductible interest.

However, I also have some extra cash. I'm currently putting it into 3) my wife's 100% offset account.

My thinking is, eventhough I'm reducing her negative gearing (or maybe possibly making it become slightly positively geared), it's better than putting it into a term deposit or one of those ING or DragonSaver accounts, getting less interest rate and paying tax on returns.

I'm not risk inclined enough to put into shares though.

Thanks for your thoughts!

Be interesting to see other suggestions form those who may know enough, I thought of the same thing as you did.

Should opportunity come where you find a better use for that cash, it can always be withdrawn form the offset & the remaining loan stays deductable.

I'd be happy with that if I had extra cash !
 
I think I'm on the right track but hoping to have it confirmed. Situation:

1) PPOR with two IO loans, one for the PPOR and the other for my IP. PPOR loan has 100% offset

2) My IP has one IO loan, no offset. Biggest Loan

3) My wife has a IP with one P+I loan. Loan has 100% offset

I earn substantially more than my wife.

Just had second child so after just purchasing 2nd IP, not in the position to take another jump yet.


I have enough cash to cover for 1)'s PPOR loan...hence won't pay any non-deductible interest.

However, I also have some extra cash. I'm currently putting it into 3) my wife's 100% offset account.

My thinking is, eventhough I'm reducing her negative gearing (or maybe possibly making it become slightly positively geared), it's better than putting it into a term deposit or one of those ING or DragonSaver accounts, getting less interest rate and paying tax on returns.

I'm not risk inclined enough to put into shares though.

Thanks for your thoughts!

Buy another IP!
 
I think I didn't convey myself well. I have already put enough funds in the PPOR offset account equalling the remaining balance. The reason for this thread is where to extra funds beyond this.

Aaah I see , if the goal is to claim maximum negative gearing benefit, then you need to generate more deductible debt and use the surplus income to pay for it.

Otherwise , what you are doing is the lesser of 2 evils. By paying into your wife's offset, it is only reducing the tax deductibility for a limited time until you find a use for the funds.

The other alternative if you don't want to place funds into a TD and pay the tax on the interest income is to just put it into your PPOR offset. It won't offset more than your loan amount, but generally speaking, you won't earn interest either ( dependent on lender ) , so no interest received.
 
The other alternative if you don't want to place funds into a TD and pay the tax on the interest income is to just put it into your PPOR offset. It won't offset more than your loan amount, but generally speaking, you won't earn interest either ( dependent on lender ) , so no interest received.

You would be better off earning interest and paying tax on the interest you earned in a high interest savings account that you can have immediate access to and no maturity date.

I would love to have your problem. I would spend the surplus cash on more investments.
 
The other alternative if you don't want to place funds into a TD and pay the tax on the interest income is to just put it into your PPOR offset. It won't offset more than your loan amount, but generally speaking, you won't earn interest either ( dependent on lender ) , so no interest received.

No issues paying the tax in interest earned...better than not getting anything and have the bank use my funds for their investment purposes at no cost. :)

You would be better off earning interest and paying tax on the interest you earned in a high interest savings account that you can have immediate access to and no maturity date.

I would love to have your problem. I would spend the surplus cash on more investments.

You're right...I did some calculations and basically the scenario is:

1) Increase equity in wife's IP by x dollars...then pay less compounding interest but less taxable interest.

or

2) Get roughly the same x dollars back in cash. I'm going with this option. Thanks for putting me on the right path.

Ubank's 5.46% looks like the best option at this point in time. Don't know what they'll do after 31 December...worst case is I'll revert back to offset option. Any other good high interest savings accounts?

Yeah, I am glad I have covered the non-deductible interest on the PPOR loan. Hope to be able to do something with surplus cash down the track...but I'm also looking at massive renovation/extension for my own IP 5 years down the track (hope to pay with cash) so we can do a swap between PPOR and IP. That's the plan anyway...forgoing more IPs in the intermediate future.
 
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