Ask Noel: Offset or savings?

Am I better off to save my spare cash in an offset account or a savings account?

If you leave your spare cash in a bank account you will earn at best 1 or 2 per cent and lose a chunk of it in tax. Money invested in the offset account earns you the same effective rate (after tax) as you are paying on the loan. This is probably 4 or 5 per cent. The offset strategy is miles better.

My wife and I are in a bit of a quandary. We have $80,000 in the bank, in an online savings account, $20,000 in shares and aim to save $4000 a month, which is 35 per cent of the about $11,000 we take home each month. We’d like to buy a house, but feel the market is too hot in the places we want to live, and also feel like our money is going to waste in the bank. Would you suggest we just take the punt and buy a house (up to about $850,000)? Or continue saving for the foreseeable future until we find our dream home (at our dream price!)? Or, something completely different?

Congratulations on how well you’re doing. I always feel home ownership is a worthy goal, and have always told people it’s often best to “bite off more than you can chew and chew like hell”. I think you should continue to save furiously, but take the time to research the market in depth so you will know a bargain when you see one.

Ideally it would be good to have $170,000 deposit to avoid costly mortgage insurance, but you need to weigh the cost of mortgage insurance against any increases in house prices that may occur while you’re saving.

If sale of shares generates a capital loss and this loss is used to offset a capital gain on sale of other shares in a tax return, is this offset amount added into adjusted taxable income for CSHC purposes?

This health card is subject to an adjusted taxable income test plus any deemed amount from account-based income streams.

There is no assets test. Your adjusted taxable income is the sum of taxable income, taxable foreign income, total net investment losses, employer provided benefits, and reportable superannuation contributions.

Capital losses claimed do not have to be added back – it is only the net capital gain that is counted.

My wife and I are both aged part pensioners with an annual income of $40,000 and assets amounting to $600,000. Unfortunately, my wife has a terminal illness and probably has less than 12 months remaining. I would like to retain my single pension. I can reduce my assets by buying funeral bonds and gifting $10,000 to our children. If my wife bequeaths say $20,000 in her will to our children, will Centrelink view this as a deprived asset and count it as among myassets?

Any asset that is bequeathed to a beneficiary in terms of a will is not treated as a deprived asset. Obviously, you will need to take advice around estate planning in its entirety, but your proposed strategy appears to make perfect sense.

I have a question about your recent article about boosting your tax refund using super. I receive 10 per cent contributions from my employer and I have salary sacrificed up to the $25,000 allowed. Am Iable to claim any deductions for this salary sacrifice?

Any money salary sacrificed is sourced from pre-tax dollars which means you are enjoying an effective tax deduction just by salary sacrificing. You cannot claim it again – that would be double dipping.

  • Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature and readers should seek their own professional advice before making financial decisions.
  • Email: noel@noelwhittaker.com.au