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Ask Noel

I HAVE a home loan for $330,000 and have increased my repayments by $200 a fortnight to reduce the term. In May next year my fixed-rate home loan will be at the end and I will have to refinance at the new fixed rate. Also, I will be moving interstate due to work reasons and will be looking at renting my current house out while I am away. What is your advice in terms of the extra repayments should I stop them or should I continue with refinancing the house as an interest-only loan while I am not occupying?

I HAVE a home loan for $330,000 and have increased my repayments by $200 a fortnight to reduce the term. In May next year my fixed-rate home loan will be at the end and I will have to refinance at the new fixed rate. Also, I will be moving interstate due to work reasons and will be looking at renting my current house out while I am away. What is your advice in terms of the extra repayments should I stop them or should I continue with refinancing the house as an interest-only loan while I am not occupying?

If you are going to rent the property out you should be keeping the loan on an interest only basis to maximise your tax benefits. The decision as to whether a fixed or variable rate is most appropriate is something only you can make but I do recommend you combine it with an offset account for maximum flexibility. You could then make your extra repayments into the offset account in the knowledge that the money is available for redraw whenever you needed it. In the meantime it will save you some interest even investors in the highest bracket save no more than 46.5 per cent due to negative gearing.

I owe $600,000 on a house valued at $775,000. Payments are $4500 per month. Credit cards and overdrafts combined are $80,000. Monthly income is $11,000 and there is not much left over. I have been toying with the idea of selling, to give myself some relief for 12 months. What are your thoughts?

You are paying back $54,000 a year so you should be making some headway on your mortgage. Talk to your bank about converting the loan to interest only, or even a 30-year term, which should cut the payments to about $3500 a month. This should free up $1000 a month to attack your other debts. Once you get them paid off you could resume your normal home loan repayments.

I have been invited to invest in a small business that I work for with the idea of selling the business, or creating an IPO in three to five years. What is the best way to invest in the business if I am confident that the investment will be successful and return five times the invested amount? Do I invest via a company and how does the tax work on the return?

You should be involving your accountant from the start. Usually the investment you make would be by way of shares in the business so a big decision is who is the best entity to hold those shares. Depending on your personal situation a discretionary family trust may be the best vehicle as this will give you maximum flexibility. Any income from the investment will be taxable income of the entity which holds the shares.

Is it possible to take money out of superannuation to purchase a new home and then, when the old home is sold, put the money back into the superannuation account (current balance of $900,000)?

We are 65 and 60 years old and work 32 and 26 hours per week respectively. Our gross annual income is $50,000.

The person who is 65 could withdraw money from super immediately but anybody aged between 60 and 65 has to trigger a condition of release. To do this it is necessary to resign from a job. It is theoretically possible to withdraw a large chunk of your super and it can be re-contributed up to age 75 as long as the contributor can pass the work test working 40 hours in any consecutive 30 days in the year the contribution is made. Keep in mind that non-concessional contributions are limited to $150,000 a year or $450,000 over three financial years if you are under 65 in the financial year in which you trigger the higher cap.

Noel Whittaker AM is a co-founder of Whittaker Macnaught. Advice is

general and readers should seek their own professional advice.Contact noel.whittaker@whittaker macnaught.com.au.

Questions to: Ask Noel, Money, GPO Box 2571, Qld, 4000, or see moneymanager.com.au/ask-an-expert.


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