50% discount on first $1000 interest

I'm a bit confused as to when this benefit kicks in. I'm reading some articles which says it got delayed until 2012/13 but even in today's The Age paper, there's a comment to say that in the upcoming financial year you get a 50% discount on the first $1000 interest your earn.

On a another note, does this $1000 also include dividend income?

On a side note,

I'm wondering which strategy would be better:

* Keep the money in my offset account (against my investment property) at around 7%
* or allocate some money into an online savings account to earn the $1000 interest, then re-allocate back to my offset when i have reached this amount to receive the discount?

Some help?

 

Highly doubt it. Dividend income has franking already.

Say you had $15384.62 (you see why I picked this amount later) and you had the choice of:

1. Putting in offset account against a PPOR mortgage (7%).

This would in effect save you $15384.62 * 7% each year = $1076.92

2. Putting in online savings account (6.5% - current top rate) to use the 50% reduction in tax

So you get $15384.62 * 6.5% = $1000 interest - tax. So your marginal tax rate is 30%. Normally would be $300 tax, however the 50% discount makes it only $150. So would be $850 total.

So no matter what your marginal rate you would be better off leaving money in the offset account.

Regards,

Jason

 

Thanks so much for your answers.