Ask Noel: Gearing into super?

I have a $300,000 mortgage on an investment property worth $500,000, which is breaking even and not providing any negative gearing benefit. I am thinking of refinancing the loan and borrowing an extra $100,000. I would then invest $50,000 in shares and contribute $50,000 to my super. Would I be able to claim this as an investment cost and regain the negative gearing benefit for the property, given I am using the funds for investment purposes, although not for property investment?

You can claim the interest on that portion of the loan that is used to buy income producing shares, but no deduction is allowed for interest on money borrowed to invest in superannuation.

With regard to Labor’s proposed limit on the ability for people with low taxable incomes to get tax refunds of franking credits, what would the effect be on dividends taken as part of a Dividend Reinvestment Plan – would new shares be limited to the franked amount only, or would they include the franking credit. In other words can a DRP be used to claw back franking credits that would otherwise be unused/not refunded?

The fact that a dividend is reinvested in additional shares instead of being deposited to a bank account does not affect the tax treatment. The amount of the dividend, plus franking credits is added to your taxable income.

Under the Labor proposal the franking credits could still be used to reduce your tax payable but if no tax is payable excess franking credits will not be able to be refunded to you.

My wife is on a temporary protection visa and as such can’t claim any benefits - also she is not of pension age. I put it to Centrelink that this is unfair to pay me half the married rate so they did an about-face and put me on the single pension rate. However, now that my wife is getting $900 a fortnight in wages I just wondered how this would be assessed and applied by Centrelink. My question is, would Centrelink use the rules for a married pension or a single pension to assess me? It seems to depend on who you talk to or who you complain to.

A departmental spokesperson says there are exceptions which allow for a member of a couple to receive the single rate of payment. In deciding whether or not to apply this exemption, Centrelink will consider whether there is financial difficulty as a result of a couple’s circumstances. If a person is receiving this exemption and their circumstances change, Centrelink will need to determine if the exemption should continue to apply. If it is determined that exemption should no longer apply, then a person is assessed as a member of a couple, which includes being paid a couple rate of payment, and being subject to the couple income and assets test. Individuals should contact Centrelink if they would like to know more about this exemption. People receiving social security payments are responsible for accurately updating Centrelink when their circumstances change, including partner income. Failure to notify Centrelink of a change may result in a penalty.

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