You should apply for a pension as soon as you reach retirement age but a considerable group of people will keep working full or part time for a few years longer.
If you own your residence you will more than likely be affected under the income test. You may also be affected under the income test because of your superannuation balance.
If you have a balance of more than $301,000 in your superannuation fund you are deemed to earn more than $112 per week and your pension is reduced under the income test.
Under the work bonus you can earn $150 per week without affecting your pension but any dollar from other income such as dividends from private companies, rent, foreign pensions, salaries or subsidies , earnings will cost you 73.cts ( See session 1)
There are good loans and bad loans. Any loan which is not tax deductible is a bad loan. This could be a loan for your residence , a car or a loan for a holiday or for medical reasons.
Any loan that is tax deductible is a good loan provided that the total of income and growth of the investment exceeds the interest of the loan.
A loan for an investment property is a particular good loan as the sum of income and growth almost always exceeds the interest on the loan. In addition you also have depreciation allowances that further enhance the income from the building. (see sessions 6 and 8)
A loan for a business is uncertain. The return in your business must be in excess of the interest paid but it is by no means sure that your business value will grow and there is a chance that the value of your business declines in which case you cannot pay back the loan and you may go broke.
If you are a pensioner and still have a job, do not give up that job before you borrow the maximum amount the bank will give you. Invest it in bank shares or an investment property and in a few years you can retire, as the income from the investment properties and bank shares will exceed the income you have now from your job. Bank shares have margin loans where you can keep borrowing and buy more and more bank shares.
Anybody can retire in a few years on the same income you have now The investment income and growth of the investment will exceed your income from a job.
All loans for investments are good loans as long as the investment yield exceeds interest costs
BORROWING MONEY FOR A RESIDENCE IS A BAD LOAN AND WILL GET YOU NOWHERE.
If you have a non tax deductible housing loan your first priority should be to get rid of this loan as quickly as possible.
If you can withdraw money from Super pay out your Housing Loan
If you are affected by the income test you should not invest any superannuation funds in an investment property without a loan. Rental income could seriously affect your income and you are in danger of having to pay 73% in “tax”. (See session 1)
We have seen that investing in an investment property under the Pension Maximiser Plan is a profitable exercise but only if you use a limited deposit. It may therefore better to only withdraw a deposit from your super. If you withdraw the full amount borrow 80% straight back and invest in bank shares.
If your rental income is 5.2% of the value of the property it is fully assessed at 5.2%.
Income from shares is deemed and if the share income is also 5.2% it is only assessed at the deeming rate of 2.25%.
This is a considerable saving if you are paying 73% (See session 1)
Always be careful how you use your superannuation funds and consider loans to enhance performance.
Also consider the tax angle of withdrawing money from your superannuation as the return may actually be better just to leave your money in super.