Categories

Accountant Aged Care Allied Health Andrew Bragg Annuity Apps Asic Asset Finance Asset Planning Asset Protection Asset Protection Strategies Assets Assets and Risks Ato Auction Audit Insurance Australian House Market Report Baby Bonus Bas Binding Death Benefit Nominations Binding Financial Agreement Binding Financial Agreements Body Corporate Bonds Borrowing Brexit Budget Budgeting Business Business Registrations Business Support Business Tax Deduction Business Value Capital Gains Tax Capital Gains Tax: Will Capital Protection Catherine Frost Cgt Checklists Commercial Loans Commercial Property Company Tax Concessional Superannuation Contribution Corporate Trustee Cryptocurrency Darren Foster Debt Debtors Deceased Estate Depreciation Dereen Wallace Director Director Id Divorce Economic Update Economy Emily Kermac Employees Estate Planning Executor Fbt Federal Budget Federal Election Finance Finances Financial Advice Financial Plan Financial Update Franking Credits Government Grants Gst Holiday House Home Office Hybrid Unit Trust Individual Ownership Insolvency Insurance Insurance In Super Interest Rates Investment Investment Loan Investment Loans Investment Property Investments Janet Kohan Jobkeeper Jobmaker Joint Ownership Ken Burk Land Tax Lending Life Insurance Linda Hamilton Loan Repayments Loans Lvr Margin Loans Margin Scheme Market Update Medical Expenses Mortgage Mortgage Broker Mortgage Broking Mygov Negative Gearing Offset Account Overseas Gifts Parental Leave Paris Financial Pat Mannix Payg Payg Variation Pension Practice Valuations Private Wealth Property Property Development Rebecca Mackie Record Keeping Redraw Facility Refinance Renovating Research & Development Retirement Retirement Planning Retirement Savings Salary Sacrifice Scams Self Managed Superannuation Self Managed Superannuation Fund Seminar Shares Small Business Smsf Smsf Borrowing Smsf Property Smsf Self Managed Superannuation Fund Steve Golding Steve Wildes Strategic Business Structuring Structures Subdividing Property Succession Plan Superannuation Superannuation Fund Tanya Hofbauer Tax Tax Benefits for Super Tax Concession Tax Deduction Tax Investment Property Tax Losses Tax Offset Tax Planning Tax Savings Tax-Free Temporary Full Expensing Tenants in Common Tessa Testamentary Trusts Tfe Training Transition to Retirement Trust Trusts Ttr Will Working from Home
Home » E-News » Latest News

Making your excess cash work for you!

Making your excess cash work for you!

If you are lucky enough to have come to that point in life where you have paid off your private mortgage you may now be looking at paying down some investment loans. There are a number of factors you need to consider to ensure you get your excess cash working for you in the best way possible.

You may or may not be intending to increase your investment portfolio in the future so you may need to ensure you have as much flexibility with you cash as possible.  This is where you will find an offset account to be ideal.

An offset account is a bank account that is linked to your loan account.  The cash balance of the offset account affects the amount of interest charged by the bank each month.  So, if you have a $500,000 loan and an offset account with $100,000 cash the bank will use the net balance of $400,000 when calculating your monthly interest charge.

Using an offset account is different to using excess funds to pay down your loans but has a similar effect.  When you pay down your loan you are typically able to access this as redraw, however, if you redraw to pay for an overseas trip (or some other personal expense) the interest on that portion of you loan is no longer tax deductible.  This is because the ATO look at the purpose of the borrowed funds, not the security.  The consequences of this can be significant especially as many brokers and advisors are not fully aware of the tax consequences of redraw. 

If you have deposited your excess funds into your offset account, when you draw money out to go on that holiday (or buy that car etc) you are not actually affecting the loan at all, you are just drawing money from your bank account.  This will increase your interest based on the example above, but the loan account balance will not change.

We have an excellent in-house mortgage broker, Linda Hamilton. Please do not hesitate to contact Linda should you require an additional information.

If you have any other questions about structures or investments please contact our office on 03 8393 1000.

Rebecca Mackie, Partner, Paris Financial

Follow me on Twitter

Image courtesy of jk1991 at FreeDigitalPhotos.net


Tags: Capital Protection | Investment Property | Linda Hamilton | Offset Account | Rebecca Mackie | Structures | Tax |