QUESTION:
I am 28, my current income is $65,000 plus super. I currently own and live in a one-bed apartment in Melbourne worth $450,000. I have a $325,000 mortgage and $55,000 cash sitting in the offset account as well as $8000 worth of shares.
I am wondering if I should use $55,000 cash as deposit to get an off-the-plan two bedroom apartment as an investment for negative gearing to minimise my tax contribution? Or should I invest them in shares? Or is it better to let it sit in my offset account with a 4.95 per cent interest offset rate?
Do you have any other suggestions as to how I could increase my investment portfolio?
ANSWER:
In my view, buying off the plan is extremely risky and in any event an investment should never be made for the tax benefits. The tax benefits, if any, should be treated as the cream on the cake.
I think the offset account is great, and it’s good to see you’re also investigating shares. One option may be to take advice about using the $55,000 in the offset account to reduce the debt on your home loan, and then take out a home equity loan to buy, say, $55,000 worth of shares. This should give you good growth potential as well as maximising your tax benefits.
