Finance Battles

 Lets throw two options into the ring and see who comes out on top.

  1. IP Offset vs HISA
  2. HISA vs FHSSS

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Debt Recycling and the Offset Fallacy

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A common miss-conception that caught me out for longer than I want to admit is the difference in 'making money' and 'no longer spending money'. When you use your offset you are 'no longer spending money', however I mistakenly thought of it as 'making money'. This meant I often miss-calculated investing while I have a mortgage. Credit Card Think of your credit card. If you spend $1,000 you start paying interest. If you repay the $1,000 you stop paying interest. Now the question, are you saving 20% pa x $1,000 forever by paying off the credit card? How do we account for the interest we no longer pay because we paid the credit card off?  I ignore it, and this applies to my offset too. The Offset Fallacy The example that made me see offsets differently was to imagine my current situation, lets say I've got a $200K mortgage with $100K in the offset. Now imagine you are debt free, and go and borrow $200K, park $100K in the offset and spend $100K on a nice ...
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DIV 293 Tax

I'm considering the impact of DIV 293 on my possible IP sale, so lets see what its all about. DIV 293 tax is a fun one as it works on the lessor of two amounts. Thus some funky things occur. Now lets put aside the very good point that focusing on reducing tax is a terrible strategy, and focus on reducing tax. Formula If  DIV 293 Income > $250K  then DIV 293 applies. If  Super < Income + Super - $250K  then  Super Assessed  Else  Income + Super Assessed Note:  Income  on this page means all DIV 293 Income excluding Super. Hold My Triple Venti Half-Caf Soy Latte Wait a second, I see something... = Super > DIV293 Income + Super - $250K = Super - Super > DIV293 Income + Super - $250K - Super  (Subtract Super both sides) = 0 > Income - $250K  (Eliminate) = Income - $250K < 0  (Reverse) = Income - $250K + $250K < 0 + $250K  (Add $250K both sides) = Income < $250K Oh, I did not expect to simplify what it t...
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The Exciting Parts of Marginal Tax Rates (MTR)

While most people are not overly excited by this subject, the engineer in me loves to optimise, and that includes the tax impact on my investment decisions. And to achieve that it helps to understand what the relevant MTR is. This is useful not only in the growth stage calculations of FIRE, but also in the RE part of it. 1. Basics My best effort is this table, with the Extra Addons below. From To MTR Notes $0 $18,200 0.0% $18,201 $26,000 16.0% $26,001 $32,500 28.0% 10% Medicare** $32,501 $37,500 18.0% 2% Medicare $37,501 $45,000 23.0% 5% LITO $45,001 $66,667 33.5% 1.5% LITO $66,668 $135,000 32.0% $135,001 $190,000 39.0% $190,001 $224,000 47.0% $224,001 $250,000 63.70% 16.7% DIV269* $250,001 $261,000 48.72% 1.72% DIV269 $260,001 47% *DIV293 depends on your Income + Super contributions plus some other funky things. If your income includes non-job income, like a capital gain, then figure this one out yourself. I have relied on this as my source: 62% effective marginal tax rat...
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