Ask Noel

My wife and I have a net income of about $153,000, which is made up of $52,000 from my wife's drawings from our business, $62,000 from my full-time job and $18,800 from each of our two rental properties. After costs of $116,000 (mortgage repayments, insurance, utilities, agents' fees), that leaves us with about $700 a week disposable income. The rental properties are valued at $910,000, on which we owe $715,000. Our principal place of residence is valued at $780,000, on which we owe $550,000. I ...

My wife and I have a net income of about $153,000, which is made up of $52,000 from my wife's drawings from our business, $62,000 from my full-time job and $18,800 from each of our two rental properties. After costs of $116,000 (mortgage repayments, insurance, utilities, agents' fees), that leaves us with about $700 a week disposable income. The rental properties are valued at $910,000, on which we owe $715,000. Our principal place of residence is valued at $780,000, on which we owe $550,000. I have $40,000 in super, but my wife has no super. Would we be better off selling the investment properties and paying off the credit cards ($60,000) and a majority of the business loan ($180,000), then salary sacrificing the extra disposable income into my super? If we offload the investment properties, our disposable income will double to $1400 a week. However, we regard the investment properties as our retirement nest eggs. We are both in our mid-40s, so want to ensure we end up with something at 65, but I'm tired of living off the credit cards.

The fact you are living off your credit cards is a clear indication that you are overcommitted and you could find yourself with serious problems if interest rates start to rise. I would certainly curtail the salary-sacrifice strategy until you can live within your means, but you should also think about selling the rental property with the highest debt. Once you get your finances back in order, you could revisit your options.

I'm single, 35, and have a gross annual income of $105,000. I recently paid off my mortgage and own my home, worth $530,000. I have $30,000 in savings and no other debt. I would like to invest and live in a better house and/or better suburb. I'm not sure which of the following options is best for me and hope you can guide me. Should I borrow against my current home, plus more, to fund a new home purchase and rent out my current home sell my current home and borrow more to buy a new one or stay in my current home and invest in the sharemarket?

The worst strategy would be to borrow against the existing home for a new residence because you would be paying tax on the rents but getting no tax benefits on the expenditure. Your options are to sell the present home, free of capital gains tax, and use the proceeds to minimise the loan on the new property while borrowing against the new property for investment, or to stay put and simply borrow against the current property for investment. You're only 35, so my preference would be to sell and rebuy.

I'm married with three children and my wife works part-time, earning $30,000. I'm self-employed, earning $260,000 a year. The business is debt-free, worth $500,000 and our house is worth $750,000 with a mortgage of $180,000. We have combined super of $120,000 and are both 38. We would appreciate your suggestions on what to do next. Our thoughts are to either invest in shares or buy a commercial building for the business, but we have no experience in doing either. Retirement is a long way off, so we've held off putting extra into super. The mortgage will be paid off in two years if we continue without investing.

You should be taking advice from both a financial adviser and your accountant. If it's possible to put a structure in place where income could be streamed to your wife from the business, you should be able to reduce your personal tax, and also contribute $25,000 each to super from the business as a tax deduction. Lack of experience in shares should not hold you back, because you can buy an index fund that matches the market, or use actively managed funds where all decisions are made by full-time professionals. A big factor in your decision to buy business premises should be planned expansion, and the relative costs of ownership compared with your present rental expenses.

Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature. Readers should seek their own professional advice. Email: noelwhit@gmail.com.

I earn $60,000 a year and during the past few years have been salary sacrificing $50,000 to super, then making a monthly withdrawal to cover expenses. With the recent changes there is no point in doing so this year. I still have $120,000 to pay off my mortgage, and have an investment unit on which I have an interest- only loan of $122,000. It is valued at $360,000. I plan to work for several more years and am hoping for another housing boom before I retire. Is this pie-in-the-sky thinking, or would I be better off selling the unit and paying out my mortgage now?

It is certainly worth salary sacrificing $25,000 to super if you can afford it, because such contributions lose just 15 per cent, whereas money taken in hand would cost you 32.5 per cent. I can't see the point of paying off the loan on the investment unit if you intend to keep working because you would be losing your tax benefits on the figures provided it should now be positively geared. Certainly withdraw $120,000 to pay off your non-deductible loan if you have reached 60 and can access your funds.

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