It is ideal to consolidate debts ahead of tax time. It’s that time of the year for most Australian wage earners where there is only one thing on their minds that is to pay taxes. It is this time where the frantic action of sending paperwork to their respective accountants happens. It’s the time when their tax returns must be compiled, searching for documents that may be important. And with the chaotic situation taking place most people tend to forget that they could have done something else in order for them to ease their troubles. But alas, by the time when the taxes come it is too late and they may have already paid more than they should have. It is why it’s important to consider all possible courses of action that will help you save your money, one such possible course is to consolidate debts before tax time.
Why is there a need to consolidate debts? What is debt consolidation and how will it reduce my taxes?
Debt consolidation involves taking out a new loan to pay off a number of other debts. The new loan may result in a lower interest rate, lower monthly payment or both. Consumers can use debt consolidation as a tool to make it easier to get out of debt.
So how will it reduce my taxes?
Once you consolidate debts, your debt consolidation loan may be partially tax deductible depending on the nature of the loan. There are two broad types of debt consolidation loans: secured and unsecured. If your consolidation loan is secured with an asset, like a house or a car, you might be able to deduct the interest paid from your taxes. However unsecured debt consolidation is a different picture. Australian Tax Office does not allow you to deduct interest on any unsecured debt consolidation loans.
If, however, you use an asset as collateral on the loan, you may qualify for a tax deduction. Debt consolidation loan interest payments are most often tax deductible when a home loan or mortgage is involved. It is also important to understand if you are going to be eligible for tax deductions based on the asset you provide as collateral against the new loan. You do not want to incur asset risk and assume tax advantages only to later find out that your interest payments are not deductible; that would do more harm than good.
If you are looking for help with debt consolidation, we at Consolidate Debts Australia will be perfect for the job. We will consolidate debts and provide the service needed .We supply debt consolidation loans to people in all circumstances.