Before going ahead with a margin loan, make sure you do your homework.
In particular, consider getting professional financial advice and taking out insurance such as income protection in case you can’t work because you’re sick, and life insurance to cover your dependants.
- The Financial Planners Association (FPA) can give you a list of planners in your area. Contact FPA on 1800 626 393, or visit its website: www.fpa.asn.au
- The Australian Securities & Investments Commission (ASIC) has information about margin loans on its consumer advice website: www.fido.asic.gov.au
- The National Information Centre on Retirement Investments Inc (NICRI) provides free information about financial planning and specific investment products. Call 1800 020 110 or (02) 6281 5744 or visit the website: www.nicri.org.au
- NICRI’s moneymap website: moneymap.nicri.org.au has a number of calculators to work out loan, investment and savings scenarios.
Weighing up the tax advantages
Borrowing money to invest is called gearing. The main tax advantage is that you may get a tax deduction for the interest you pay on your loan and other investment costs.
Don’t let tax advantages cloud your judgment. Assess the investment on its own merits and treat tax advantages as a bonus.
For more information contact the tax office on 13 28 61 or visit its website: www.ato.gov.au