Newspaper article The Chronicle (Toowoomba, Australia)

Time to Increase Your Deductibles

Newspaper article The Chronicle (Toowoomba, Australia)

Time to Increase Your Deductibles

Article excerpt

DESPITE the global financial crisis it seems there will still be tax cuts for all on July 1 therefore it's important to bring tax-deductible expenses into this financial year if possible.

It may be getting a bit late to paint your investment properties or do major repairs on them, but a deduction that is available to all investment borrowers is pre-paying interest.

Let's assume you have an investment loan of $200,000 at 7 per cent and that is on an interest only basis as I have always recommended.

If you earn $100,000 a year now and prepay a year's interest, that's $14,000, your tax saving will be $4150.

A major benefit of doing this right now is that you will have prepaid a year's interest and so protected yourself from any interest rate rises in the next 12 months.

Make sure you liaise with your lender because you can't simply plonk $14,000 into the loan account and then claim a tax deduction for it.

Doing it this way will result in the lender simply taking the repayment off the principal and you suffer a double whammy. …

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