PROPERTY

Ask Paul: I can pay off my investment property in full but should I?

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I bought my first home from my super last year and the tenant has been in the house for eight years.

I am claiming back on getting small projects done to the property, such as painting the external wall, etc.

I have ample funds to pay for the house outright but I took out a loan with Bendigo and Adelaide Bank for $46,000 just to get a good credit rating, to be honest.

paul clitheroe

I plan to retire next year and move back into the property, which I will finish, but should I pay it off outright now or keep making monthly payments until I am ready to retire?

That is a nice position to be in, Kaye.

I am not quite sure why you will need a good credit rating as you move into retirement, but it can't be bad to have one!

I don't know a lot about your tax situation, but it seems to me that continuing to make monthly payments while the property is rented is a good plan.

Maintenance on the property should continue to be tax deductible while the property is rented, providing of course the work done is not an improvement.

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Paul Clitheroe AM is the founder of Money and serves as the publication's editorial adviser. One of Australia's most trusted personal finance experts, Paul has spent decades helping Australians build wealth, manage debt and make smarter money decisions. He is widely known for host­ing the Money TV program and authoring best-selling personal finance books. Since launching Money in 1999, he has played a leading role in delivering practical, independent financial guidance to Australians. Paul is chair of InvestSMART Financial Services. He was the founding chair of Ecstra Foundation, a national not-for-profit focused on improving financial wellbeing, from 2018 to 2026, and led the Australian Government's Financial Literacy Board and Financial Literacy Australia from 2004 to 2019. In academia, Paul is chair in financial literacy at Macquarie University, where he is also a Professor in the School of Business and Economics. Ask Paul your money question. Due to volume, Paul cannot respond to questions posted in the comments section.
Comments
Geoff Witcomb
March 11, 2020 4.43pm

Hi,

I was under the impression that you couldn't claim deductions for things like painting for the first 3 years on an investment property. Well that's what the ATO told me when I incorrectly claimed. They are of the opinion that the purchaser would have been aware of any requirements and the purchase price would have been adjusted accordingly to compensate.