Pre-pay your interest and save
If you have a margin loan, you may already know that the interest you pay on that loan will generally be tax deductible. What you may not know is that you can actually pre-pay the interest on the loan for the 12 months ahead and then potentially claim a tax deduction this year for the amount you pre-pay.
At first glance, there may not seem to be much point in pre-paying interest to get the tax deduction now. After all, you can just wait until next year and claim the tax deduction then. But what if the Government announces a tax cut on next budget night? The down side will be that your tax deduction will be less valuable to you next year than it is this year. The difference may not be huge, but it might be worth considering. You may also want to consider your expected relative tax position this year versus next. You may decide that the tax deduction will benefit you more this year.
There are some things you need to consider such as the effects of interest rate movements over the year and what happens if you want to pay off your loan during the 12 months. Speak to your financial adviser - they'll be able to explain how these would affect your decision to pre-pay and provide you with some numbers that will make it easier for you to visualise how you can benefit from this strategy.
The key to your financial future is a series of small, sensible steps. The general advice provided here doesn't take into account your personal objectives, financial situation or needs and because of that, the very first step is to speak to your financial adviser. Your financial adviser can take you through all of these strategies and many more besides. They know your personal financial situation and are perfectly placed to pick out the strategies that are going to work for you, and then help you implement them.
For more information, please read pre-paid interest
If you'd like more information, talk to your financial adviser. If you don't have an adviser, we can help you find one.