Each week, financial adviser and international best-selling author Noel Whittaker answers your questions.
When borrowing to invest in shares, instead of taking out a margin loan or personal loan (at 8 per cent to 14 per cent), could you top up a home loan (at 6 per cent), and would the ATO still allow the interest on this to be tax deductible?
The interest on any loan to produce income-producing assets is certainly tax deductible, but you could find yourself stuck with complicated bookkeeping if you have a single loan that is part deductible and part non deductible. It is much better to have one loan for the non-deductible home loan and another for investment. Most banks will let you have a loan facility that can accommodate different loan splits within it. Interest, whether deductible or not, is still a cost and you should seek out the lender with the lowest interest rates. Also, remember to pay down non-deductible debt before deductible debt - this is usually achieved by having your deductible debt on interest-only terms.
I am 50, on a disability support pension, and will never be able to work again, although my partner works full time. I have some money in a super fund, which is being eaten up with fees at the moment. Can I access this money, and if not, what is the best thing to do with it?
There are ways to withdraw super before your preservation age, however these are limited to severe financial hardship or compassionate grounds, each of which possess differing qualifying conditions and limits to withdrawals. You are also required to pay tax upon the early withdrawal of super, which needs to be considered if you take this route. It sounds as though you're concerned about fees, so consider reviewing your super fund to ensure you are in the most suitable fund relative to your needs. And ensure that the investments are suited to your tolerance to risk and investment time frame.
In a recent article on Centrelink pension entitlements, you advised that the family home is not subject to assessment if it's on land that's smaller than two hectares. My property is just over five hectares, although I'm only allowed to clear half an acre for use and the remainder cannot be developed because of protection requirements. What are the implications of this larger land area in relation to Centrelink entitlements, and what can be done to minimise any effects?
This is quite a complex issue. The best way to approach it would be to talk to the financial-information people at Centrelink and obtain a private ruling from them on the valuation of the land. Given the restrictions, you may find Centrelink will apportion most of the value of the property to the home and surrounding two hectares and your entitlements will not be affected.
Savings goal is better late than never
I'm 39 and rent but have no savings and, unfortunately, never learnt the value of saving. However, I want to change and could save $100 a week. What are my best options? Should I take out a loan for an investment portfolio? I have set up an account to pay all my bills following your example. I would like to buy my own property but realise that will not be affordable, so I would like to boost my super and/or savings for retirement.
It's great to see that you have finally made saving and investment a priority. For the next 12 months, I suggest you focus on money management and saving as much as you can in an online savings account. At the end of that time, you could take advice on borrowing for investment - a regular gearing program may be perfect for you.