IP Offset or Shares

Not exactly (though some P2P platforms operate this way). Yes, different loans carry different levels of risk, but rather than link the rates of return to the risk, they are linked to the investment/loan period (similar to a fixed term deposit = the longer the term the higher the rate of return). Risk of default on different loans is 'covered' by a substantial buffer account held by RateSetter (ie they pay you out if the borrower defaults). Your fees cover/grow the buffer account.

Probably beyond me to explain the platform fully in my lunch break, but check out the website. Happy to answer any specific questions relating to my experience using the platform though.

 

Sorry all, looks like that welcome bonus is no longer active!

Oh well at least now I cant be accused of pushing my own self interest!

Still check it out!

 

Shares. Offseting deductible interest = higher net income = effectively paying tax on that 4% you "save"

 

Only from my simple experience,and depending on the entry time add reinvesting and compounding span that over 21 years ,much the same as property ..The only problem is every now and again they drop in value but the dividends in all the banks i invest in short term longterm and franking credits is more what i,m interested in the price is not that important only for investors that bought into today..

 

Yes if you get fully franked shares there will be tax advantages for lower income earners (even for higher earners too).

 

Are you invested in all four? That is not a very safe bet IMO. Though chances of them going bankrupt is very slim but some kind of regulatory changes in the industry might over expose you to volatility.

 

And you can depreciate your property against the share income further to reduce tax.

With that strategy isn't it better to not keep anything in your PPOR offset too? If you manage to get >4% then you are better off paying interest on your PPOR too?

 

No not all of the big "4"only 3 i had a very bad experience with a insurance company linked to one bank so only hold 3 of the 4..
But i short term trade in the lower end ,BOQ-BEN and several others ,and it's not a easy game to play three trades on BOQ this year went very well then went in again in early may and it's only a few days ago it's back too where i first started,after a while once you don't listen too all the media boom bust fast bucks no traders the same patterns just stay the same only the price is different..imho..

 

Sorry I don't understand what you mean here.

If you had a non-deductible PPOR debt you would be better off to pay this down and borrow rather than using the offset - otherwise you would incur more non-deductible interest.

 

I mean if you dont generate any income from your IP you can negatively gear it against other income. And by ng'ing it against dividends you can make the dividends essentially tax free.

 

How do you deduct interest on an investment that is not generating any taxable income?

 

@hash_investor

Im confused too, you seem to be alternating between IP and PPOR in your comments?

 

I don't know what this means either. If an IP didn't have any income is it an IP. You cannot negative gear an IP against dividends - what you could do is claim interest from a loan used to buy the shares against the dividends.

 

You cannot - unless there is an expectation of income.

But here we were talking about the interest on the main residence - which would not be deductible if you took money out of an offset.

 

I said taxable income. If income minus the expenses is negative then there is no taxable income. But if that is positive then the positive part will be taxable. Sorry if I misused the word taxable.

But my point is you can offset your property losses and depreciation against your other income. Isn't it? If that is true then ideally I should keep my IP neutral at best to avoid paying tax on this income and instead generate income from franked dividends. And in that case will I be able to deduct / depreciate my property against dividend income?

 

Sorry for the confusion. I am only talking about the IP.

 

I think you are confusing me and others by the terms you are using. Broadly speaking though you may be right

 

OK, glad you agree on that.

My question is (sort of) unanswered still. I will try to put it out there in a different way now.

How do you deduct expenses from your income if you are not paying any tax on that income? Fully franked dividends is one example. If you don't pay any tax on these dividends how do you deduct your expenses then

 

If your income is $0 and you have a deductible expense of $1000 your new income becomes negative $1000