How to use a mortgage offset account to best advantage


Just keep in mind it is possible that your lender may not allow you to attach an offset account to an existing loan. If that is the case I would consider refinancing to a loan with an offset account – the benefits are too good to lose.

I bought an apartment in 1987 for $106,000. It was for my elderly mother to live in. She was a pensioner and paid me no rent – I paid all the strata fees and rates. She lived there until she died in January, 2016. I then rented it out. I am now looking to sell it for $260,000. Will I be eligible for any concession of Capital Gains Tax (CGT), given that it was the primary residence of a family member and not income earning for that period?

The property was purchased before August, 1991, so you cannot use legislation that takes effect from that date which allows you to add expenses, such as rates land tax and insurance, to the base cost to reduce your CGT.

Because the property has always been in your name, the fact that somebody else lived in it does not affect the CGT position. Therefore, the cost base will be the purchase price plus all acquisition costs and any capital improvements you made to the property since you bought it.


You will receive the benefit of a 50 per cent CGT discount, as the property has been owned for more than a year. So, if we assume the base cost was $120,000 and the net sale price will be $240,000, your gross gain will be about $120,000, which will become $60,000 after the discount. This will be added to your taxable income in the year the contract for sale is signed.

Depending on your age and financial situation, it may be possible to reduce the tax on that gain by making a tax-deductible contribution to superannuation.

How many years prior to getting the age pension are taken into account by Centrelink? We sold our residence in 2017 and, in 2019, bought and sold another property in the same year. We bought our current residence this year and intend to apply for the age pension next year. Will any of these transactions be subject to deeming?

Centrelink looks back five years for assets that were disposed of in that time. This is to prevent people gifting away assets prior to applying for the pension. This does not seem to apply in your case because all you have been doing is buying and reselling residences.

Your home will be an exempt asset and any other financial assets that you now have will be subject to deeming. Just keep in mind that deeming only affects people who are income tested.

My father and I own, as joint tenants, a property he lived in before recently moving into residential aged care. I took out a loan with the property as collateral, to pay the aged care bond. The property will soon be rented out and I have received conflicting advice on whether the loan interest would be tax deductible. Can the interest be offset against any rental income and how will this affect the Centrelink family tax benefits we receive?

Interest on a loan for an aged-care bond will not be deductible, as the bond is not producing interest.

The bond paid will be an assessable asset for the aged-care means test and the rent will also be assessed for aged care and the pension.

In two years, your father’s share of the asset will also become assessable for pension purposes.

Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance.

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