#3 Tax impacts
Here are some tax impacts that are worth considering when weighing up your options.
Mortgage
Unless you own an investment property (where you can claim on the interest charged on your home loan if the property you bought with the loan is generating taxable income), no deduction is available for interest on your family home.
Therefore, making extra repayments on your family home mortgage could be an effective strategy to save on future interest (which means that a dollar saved is a dollar earnt).
Super
There are a number of possible tax benefits from making extra contributions into super. These include a typical tax rate of 15% on investment earnings when making pre-tax contributions.
There are super strategies that may benefit you at tax time. Pre-tax super contributions (such as employer contributions under a ‘salary sacrifice’ arrangement, and personal contributions on which you claim a tax deduction) are taxed at 15%* which may be lower than your individual income tax rate. Where you do not claim a tax deduction, your personal contributions may attract a government co-contribution. Additionally, spouse contributions may receive a rebate.
If you are considering these options, the rules can be complex and limits apply so check with your accountant or adviser.
*or 30% if you earn over a threshold which is currently $250,000