All Topics / Help Needed! / HECS debt intoInvestment Loan?

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  • Profile photo of vucko84vucko84
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    @vucko84
    Join Date: 2008
    Post Count: 42

    Can someone help me with the maths of whether I'm better off putting my HECS debt into an Investment Loan and claiming the extra Interest+depreciation?

    Scenario (numbers approx/rounded):

    HECS Debt: $35000
    Repayments: $800pm

    Inv Loan: $350,000 (current), $385,000 (with hecs)
    Use Interest 7%pa

    Obviously cash flow will be better but what is the 'cost' of repaying it?

    Incl. tax benefits etc.

    Profile photo of Scott No MatesScott No Mates
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    @scott-no-mates
    Join Date: 2005
    Post Count: 3,856

    Unfortunately your HECS debt is not tax deductible nor classed as an investment for the purpose of increasing the debt on your IP. If you roll your HECS debt into your IP loan, the interest on this portion will remain as unclaimable. The HECS debt is adjusted by CPI which is alot less than your rate of interest (moreso depending upon your marginal rate of tax).

    Profile photo of vucko84vucko84
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    @vucko84
    Join Date: 2008
    Post Count: 42

    For the purposes of this exercise, let's assume that the additional credit on the investment loan is for "renovation" purposes.

    Profile photo of PaulliePaullie
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    @paullie
    Join Date: 2009
    Post Count: 217

    So your going to take more out on your IP as a "reno" expense to pay down your HECS debt so you can continue claiming interest on the "reno" expense … then you wonder why we pay high taxes in this country.

    Profile photo of Scott No MatesScott No Mates
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    @scott-no-mates
    Join Date: 2005
    Post Count: 3,856

    you could be lucky enough not to suffer a tax audit but then again you could. Is a spell for fraud seriously worth the risk?

    Profile photo of vucko84vucko84
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    @vucko84
    Join Date: 2008
    Post Count: 42

    The money would go towards "reno" as I will use savings to repay HECS but have an increase in the offset account for "emergency" purposes, that's all.

    Profile photo of Scott No MatesScott No Mates
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    @scott-no-mates
    Join Date: 2005
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    Just need to get something straight – do you intend using funds which are in an offset or other account to pay off your hecs debt (perfectly fine) or increase your debt on an ip to pay off the hecs debt (which would still remain non-deductible no matter how you package it)?

    Profile photo of vucko84vucko84
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    @vucko84
    Join Date: 2008
    Post Count: 42

    I like having funds available "just in case"

    So I would use my savings to pay off hecs but increase my IP offset account by approximately the same amount so I have access to this money – even though I may not use it immediately.

    Does that make sense?

    Profile photo of Scott No MatesScott No Mates
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    @scott-no-mates
    Join Date: 2005
    Post Count: 3,856

    if you want funds available for ‘justin’, it might be best achieved by a loc.

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