A way for some eligible investors to have more money in their Pocket!
- What is Interest in Advance?
Interest in Advance is an option on interest-only Fixed Rate Investment Loans, which lets you pre-pay the following year’s interest and allows you to claim it back as a tax deduction this year.
Generally Speaking, interest in advance is more attractive than interest in arrears as the bank would offer a relatively low rate of interest in advance loan type.
Mr. Wong has annual income 100K, he needs to pay income tax $26, 117 for financial year 2017/2018 based on Australian Tax.
- Home Loan Amount: 500K
- Loan Type: 3.98% annual interest in advance
- Amount of interest: : $19, 900 ann. (represents 12 months’ interest)
Mr. Wong prepays $19, 900 annual interest in advance on her investment loan on 30 Jun 2018.
Mr. Wong meets the 12 month rule and is able to claim back $7,466 for the 2017/2018 income year.
- Key Takeaways
By pre-paying interest in June, Mr. Wong is able to maximize the deductible interest in that financial year.
However, Interest in Advance only benefits certain investors such as :
- Investment loan –property investor with these loan types
- Investor who has high financial freedom eg: self-employed investor
(investor clearly knows that he earns more for this financial year than following financial year, so he can benefit from negative gearing.)
Last but not least, interest in advance could help certain investors avoid a penalty fee on late payment.
Feel Free to contact our consultants/specialist by dialing 1300 800 123 for more financial service.