Personal Finance

Personal Finance

Newcastle Herald
2 August 2007
Noel Whittaker

QI have an investment property in my name with a $200,000 interest-only mortgage. My husband and I have a principal-and-interest mortgage of $600,000 on our house. We have been offered a great rate if we bring both of these loans across to another bank but they only offer the principal-and-interest mortgage. How do I keep my investment loan separate, since I don't want to repay any capital on it and I also want to keep my deduction for the interest paid on it for tax purposes?

AJust make sure it's not a honeymoon rate because in my experience most banks tend to charge approximately the same rate over the long term the differences tend to be in fees and flexibility. It is amazing that the bank does not offer an interest-only facility and this gives me some concern about their ability to handle your requirements as time goes by. However, if you have your heart set on changing banks, you could always put your investment loan on a 30-year principal-and-interest basis as the payments will be very close to interest only.

QAn employee wants his bonuses to be paid in super. What are the implications?

AThe term is salary sacrifice and it is one of the most valuable benefits an employer can offer to a staff member. There is no disadvantage to the employer but the employee should clearly understand that money in super is inaccessible until the employee reaches preservation age, which is 55 or more.

QI am a home owner aged 70, recently widowed, and am trying to look at any movement I should make to my finances with the recent changes to superannuation. I have around $550,000 invested in allocated pensions plus $400,000 in a share portfolio. Even moving my entire super plus a large portion of the portfolio into a complying pension would not result in an aged pension and as I do not currently pay much tax with imputation credits and other rebates there would be no point in moving funds. Any suggestions?

ATo be eligible to contribute to super you would need to pass the work test which involves working 40 hours in 30 consecutive days. The main benefit of having money in superannuation is to save tax, but transferring shares to super would result in CGT. The CGT could be eliminated if you passed the work test and were eligible to claim a tax deduction for part of your contribution, but you would still lose 15 per cent of the deductible portion of that contribution. You could discuss it with your accountant, but on the information provided it would appear there is little benefit in you transferring more money to super.

Send your questions to noelwhit@gil.com.au. Readers should seek their own expert advice before making financial decisions.

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