Join our investing community

50% discount on first $1000 interest

Discussion in 'Accounting, Tax & Legal' started by archangelsupreme, 26th Jun, 2011.

  1. archangelsupreme

    archangelsupreme Well-Known Member

    Joined:
    7th Sep, 2007
    Posts:
    206
    Location:
    Australia
    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?
     
  2. jrc77

    jrc77 Well-Known Member

    Joined:
    26th May, 2008
    Posts:
    147
    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
     
  3. archangelsupreme

    archangelsupreme Well-Known Member

    Joined:
    7th Sep, 2007
    Posts:
    206
    Location:
    Australia
    Thanks so much for your answers.