My husband and I have two rental investment properties that we have been passively dealing with for nearly 10 years. They didn’t lose the 2022 tax year. He earns $130,000 a year and depends on it to reduce his taxable income. I earn $77,000 a year. To reduce our taxes in the future, we wonder if we should buy another property, sell the property, buy a 100 percent oriented property, or spend the money on other properties. A property currently pays no interest as it is fully compensated by our savings. I advised years ago to start paying off the biggest loan after we paid off our home loan.
You should never make investment decisions with the sole objective of saving taxes. Any tax savings should be best on the pie. Selling one property and buying another one can be an expensive process because there may be capital gains tax on the sale, and of course stamp duty and other costs on the purchase of the new property.
Purchasing another investment property as a tax-saving measure may end up at an unexpected cost.attributed to him:Simon Leach
But even if you buy property in your spouse’s name for say $500,000, and borrow $500,000, the net rent must be at least $15,000 per year and the interest should be around $30,000 per year. He’s in a 39 percent tax bracket, so losing $15,000 would save him only $5,850 in taxes and he’d still pay $9,150 out of his own pocket to make up the shortfall.
A better option might be to increase your tax-deductible contributions into retirement – you are allowed $27,500 each including an employer contribution and enjoy the fact that your investment properties now contribute to your income without detracting from it.
My wife is 65 years old and I am 63 years old. We have $850,000 in the super between us. We made a $100,000 gift for our daughter in 2021 to help her buy a house, and we want to give a similar gift to our son later this year. We are planning to transfer the money to our son’s bank account, will that be ok? We understand that any gift given in the five years prior to applying for an age pension will be considered an asset. When we finally apply for an old-age pension, what kind of proof do we need to give in exchange for money given to children as a gift?
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Given your age, you are free to give gifts without limits whenever you like, and as I explained, the money gifted is held as a foreclosed asset for five years from the date of the gift once you are eligible for the age pension. I am sure that the fact that the money went into the recipient’s bank account would be sufficient evidence for Centrelink.
I’m 63 years old, earn $152,000 a year and report salary sacrifice to the fullest. You mentioned that people who are close to retirement may be better off focusing on contributing the maximum amount to their retirement pension, rather than paying the mortgage. Given the fact that interest rates are going up, and that pension returns may be somewhat questionable for the next couple of years given the state of the world, I’m wondering if I’d be better off simply paying off the mortgage.
Because of the way numbers work, the rate doesn’t matter much if the term is short. In your case, you may be just two years after retirement and already increasing your retirement contributions. I agree that rates are going up, and pension returns cannot be guaranteed over the next couple of years, so I suggest that focusing on paying off the mortgage is a good way to spend the excess money.
Originally published at Melbourne News Vine
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