Here’s what you need to know today

• Queensland’s trial of 50 cent public transport fares has been an early success. Queensland’s Premier Steven Miles has promised to make the 50c fares permanent if re-elected and other Australian states are reportedly planning similar trials.
  
  

• Australia’s Federal Opposition has confirmed they will not support recommended reforms to the Reserve Bank of Australia’s board. With the Greens demanding the Government retain the power to override the RBA, it is looking unlikely that Labor’s reforms will get enough votes.
  
  

• Space history was made last week as SpaceX completed the first ever private spacewalk. American billionaire Jared Isaacman spent hundreds of millions on the mission to be the first person to complete the private spacewalk alongside SpaceX engineer Sarah Gillis.
  
  

• OpenAI has released a new series of AI models which, it claims, are capable of human-like reasoning. The company claimed the new model, called 01, achieves results similar to PhD students in maths and science tasks and will spend more time ‘thinking’ before responding
  
  

• Speaking of OpenAI, reports are it is in talks with a UAE-government backed fund to raise capital at a $150 billion valuation. This is nearly double the $86 billion it raised at last year. And that was almost 3x the valuation it had raised at earlier in the year. This company is growing at unprecedented speed.
  
  

• Finally, get ready: this week we’re going to be hearing a lot about the US preparing to cut interest rates. It is all-but-guaranteed with America’s latest inflation and economic data, but we’ll be hearing officially on Thursday morning (Australian time). Last week, the European Central Bank cut interest rates for the second time in three months as concern about inflation is replaced by concern about slowing growth.

What the…?

Here’s a surprising discovery: we might owe wine’s existence to the asteroid that killed the dinosaurs 66 million years ago. Which leads to the ultimate would-you-rather: would you trade dinosaurs existing for wine?

Investing is a lifelong journey

Here’s what you can learn today.

Debt recycling: How do you keep paying a mortgage off, if you’re taking money out of the house & putting it in the market?

We put this question to Dylan Pargiter-Green, Financial Adviser and Director at Bold Wealth.

Debt recycling is the process of paying down non-tax deductible debt and re-drawing new debt, to be used for investment. As the investment earns and grows, the balance of this investment gets larger, against a mortgage which you’re paying the same level of interest against as before, except now its tax deductible. Assuming an average market growth rate of 8-9% and a current before tax mortgage rate of 6% (although long term averages are closer to 4%), there is an arbitrage opportunity by holding investment debt over PPR [primary place of residence] debt.

Each year, you will take the earnings of the investment and ‘recycle’ these funds through the mortgage again in order to reduce non-tax deductible debt and redraw new tax-deductible debt. By doing this, your interest cost remains the same, but now you’re able to claim a portion of it against your tax as it’s being used for income producing investments. You can then use this additional tax saving to invest further, or alternatively pay down the mortgage principal additionally.

Over time and with annual recycling of growth the balance of your investment grows to be the same or greater than your mortgage balance. At this point, you have the choice to sell your investments and pay off the mortgage entirely. Many clients will then actually choose to continue holding their now 100% tax deductible mortgage and allow the compounding of the investment to continue beyond the ‘pay off point’ as this is where the investment growth becomes significant and the clients can generally pay their remaining balance off using only a portion of the investment later on.

Want to speak to Dylan or another of our hand-picked financial advisers? Fill out the form on our website and we’ll put you in touch.

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